EPF Wage Ceiling Hike: Employers Told Not to Cut Salaries

The Labour and Employment Ministry has directed employers not to reduce employees’ statutory wages or pass the additional employer EPF contribution to employees through CTC adjustments after the EPF wage ceiling was increased from ₹15,000 to ₹25,000 per month with effect from September 17, 2026.

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The revised EPF wage ceiling brings employees earning between ₹15,000 and ₹25,000 in statutory wages within mandatory EPFO coverage, subject to the applicable provisions.

The government expects the change to bring more than 51 lakh additional employees under the social security framework.

Ministry asks employers not to cut statutory wages

According to a Times of India report, the Labour Ministry has specifically asked employers not to reduce employees’ statutory wages following the increase in the EPF ceiling.

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The ministry has also clarified that an employer’s statutory contribution cannot simply be treated as an employee deduction by describing it as part of the employee’s cost-to-company (CTC).

Also Read: EPFO Wage Ceiling Raised; EPS Pension Could Rise by Up to 67%

Employers have been asked to ensure that their statutory contributions are deposited correctly and that employees’ statutory wages are not reduced contrary to applicable law.

The ministry has asked employers to start assessing affected employees and complete the required process of identification, calculation, enrolment, reporting, remittance and reconciliation instead of waiting for the next salary-processing cycle.

The government has acknowledged that the higher wage ceiling will increase the statutory cost for employers. It has said eligible establishments may partly offset the additional cost through incentives available under the Pradhan Mantri Viksit Bharat Rozgar Yojana (PMVBRY), subject to the scheme’s conditions.

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What the change means for employees

The increase mainly affects employees whose statutory wages are above ₹15,000 but do not exceed ₹25,000. Workers in this band who were previously outside mandatory EPFO coverage can now come under EPF, EPS and EDLI benefits, subject to the applicable rules.

For a worker covered on the full ₹25,000 wage ceiling, the mandatory employee contribution at 12% would be ₹3,000 per month, compared with the earlier maximum contribution of ₹1,800 based on the ₹15,000 ceiling.

The employer also has a statutory contribution, with the applicable portion allocated between EPF and EPS according to the rules.

This can affect monthly take-home pay for employees who are newly brought under mandatory EPF coverage because their own contribution is deducted from salary.

However, the higher contribution also increases retirement savings and provides access to the applicable pension and insurance benefits.

For HR and payroll teams, the immediate requirement is to identify employees covered by the revised ceiling, update payroll systems and ensure that the employer’s statutory contribution is not shifted to employees through an inappropriate reduction in statutory wages or CTC restructuring.