NEW DELHI: In a move that could significantly improve the coverage of the Employees Provident Fund Organisation, a proposal to increase the monthly salary cap beyond the current Rs 15,000 is back on the table, while proposals are also being made to increase it to Rs 25,000-30,000 per month.Salary cap refers to the salary threshold up to which an employee in an establishment covered under EPFO is required to pay monthly contributions.The government had earlier discussed a proposal to increase the threshold to Rs 25,000 – but this was shelved due to reluctance from employers who wanted the limit to be retained. Some suggested that a higher cap should be accompanied by a lower contribution. However, some employee unions had demanded a cut of Rs 30,000.The current cap was set over a decade ago, in September 2014, and makes EPFO membership optional for anyone earning more than Rs 15,000. Since then, salaries have increased significantly, and in many states the monthly minimum wages are now above this threshold, even for unskilled workers. This means that many low earners or minimum wage earners remain outside the scope of social security. Earlier this week, the Supreme Court ordered the Labor Department to review the cap within four months.The move will expand EPFO’s subscriber base and bring more workers, especially in the unorganized sector, under the purview of the pension fund. This comes at a time when the new labor laws have been announced and are expected to be implemented in the next few months, with the clear aim of ensuring that an employee’s wages are at least 50% of the total remuneration and the rest consists of allowances.Officials said by clearly defining wages, labor laws would reduce disputes over eligibility. They also said that at the current cap, the majority of contributions are around Rs 15,000 and an increase will raise the level, helping workers have a larger pool of money in retirement, especially given the role of compounding. Recently, EPFO had mandated a minimum balance of 25% in a subscriber’s holdings while relaxing the rules for withdrawal. Data available up to FY24 puts the number of active contributors under the EPFO at nearly 7.4 crore, while the pension fund board has nearly 32 crore member accounts comprising a mix of active and former contributors.
