The Supreme Court during the hearing questioned the central government as to why the salary cap for EPFO has been kept unchanged for the last 11 years when salaries, inflation and cost of living have increased significantly in the last decade. According to the court, the scheme designed to provide social security has become a hindrance to many employees today.
Why is EPFO salary limit stuck for 11 years?
In 2014, the salary limit under EPFO was increased from ₹6,500 to ₹15,000. Even though years have passed since then, no change has been made. During the hearing of the Public Interest Litigation, the Court drew serious attention to this discrepancy.
Today, the minimum wage in many states is more than ₹15,000. In such a situation, many minimum wage earners are left out of EPFO's mandatory limits. The court held that this position goes against the core purpose of EPFO – retirement, pension and social security.
File ready, but pending approval
Importantly, the government is not ignorant of this issue. In early 2022, a sub-committee of EPFO recommended raising the salary cap, which was also approved by the Central Board of Trustees (CBT). However, this file is awaiting final approval for a long time.
Now after the order of the Supreme Court, the petitioner has been instructed to submit a representation before the government within two weeks. Based on that, it will be mandatory for the central government to take a final decision within four months. With this decision, the process that has been stalled for years can now be speeded up.
How much can the salary limit increase?
If the central government accepts the Supreme Court's directions, the EPFO salary limit is likely to increase from ₹21,000 to ₹25,000. At present the contribution under EPS (Employee Pension Scheme) is limited to ₹15,000. Increasing the limit will contribute more money to the pension fund of the employees.
For example, if the salary limit is raised to ₹25,000, the monthly pension contribution may increase from approximately ₹1,250 to ₹2,083. That means an additional benefit of around ₹ 10,000 per year in the pension account, which will strengthen financial security after retirement.
EPFO 3.0 Vision and Impact on Employers
The government is seeing the move as part of its “EPFO 3.0” vision, which aims to bring more workers under social security. However, on the other hand, this move will also increase the financial burden on employers, as they will have to bear the cost of pension contributions.
The future direction of millions of private sector employees will be determined by what the central government takes in the coming months. An increase in EPFO salary limit can prove to be a huge benefit for employees in the long run.
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