EPFO wage ceiling may be indexed to inflation gauge

The government is considering indexing the wage ceiling under the Employees' Provident Fund Organisation (EPFO) to an inflation gauge or some other measure to allow periodic revision. The last revision in EPFO wage ceiling was done in 2014 when it was raised to ₹15,000 from ₹6,500. The issue was deliberated at the ad-hoc committee on EPFO coverage, a senior official told ET.

According to the official, the options being considered include linking it to the consumer price index or dearness allowance or the median wage. "An expert committee is likely to be set up to suggest the most appropriate index for the purpose. Then the labour ministry will hold consultations with all relevant stakeholders before a firm proposal is moved," said the official, who did not wish to be identified.

Wage ceiling under the EPFO has been revised only eight times since the inception of the scheme in 1952. It stood at ₹300 in 1952, ₹500 in 1957, ₹1,000 in 1962, ₹1,600 in 1976, ₹2,500 in 1985, ₹3,500 in 1990, ₹5,000 in 1994, ₹6,500 in 2001 and ₹15,000 since 2014 onwards.

While this would enhance the EPFO coverage, it would mean an additional cost to the employers and the government and hence the proposal could face stiff resistance. Besides, there would be an increase in the administrative cost for running the schemes under the EPFO.

This is because an employer makes a matching contribution of 12% of the workers' basic salary towards provident fund while the government contributes 1.16% to the Employees' Pension Scheme for every worker, with the wage ceiling fixed at ₹15,000. Of the employers' share of 12%, 8.33% goes into the pension account of the beneficiary.