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

The Union Cabinet has approved an increase in the EPFO monthly wage ceiling from ₹15,000 to ₹25,000, a move expected to bring more than 51 lakh additional employees under mandatory EPFO coverage.

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The change will also affect eligibility and pension calculations under the Employees’ Pension Scheme (EPS).

The wage ceiling was last increased to ₹15,000 in September 2014. The new ceiling will cover employees with basic pay and dearness allowance of up to ₹25,000 a month, according to the government announcement.

What the New EPFO Ceiling Means for Employees

The decision is relevant for employees earning between ₹15,000 and ₹25,000 who were earlier outside mandatory EPFO coverage because of the existing wage ceiling.

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The government estimates that more than 51 lakh additional employees could come under mandatory coverage.

Also Read: Cabinet Raises EPFO Wage Ceiling to ₹25,000 From ₹15,000

The Cabinet decision is also expected to increase the government’s expenditure on the programme. The annual government outgo has been estimated at around ₹11,339 crore, while the estimated expenditure over five years is about ₹56,696 crore.

For employers, the change means a wider section of employees could come under statutory social security coverage.

It will also require HR and payroll teams to review employee eligibility, salary components and contribution calculations once the revised provisions are implemented.

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How EPS Pension Could Increase

The revised ceiling can affect the pensionable salary used for EPS calculations. Under the EPS formula, monthly pension is calculated as:

Monthly EPS Pension = Pensionable Salary × Pensionable Service ÷ 70

Pensionable salary is based on the average monthly salary, including basic pay and dearness allowance, during the last 60 months before exit from the pension fund.

According to the calculation, an employee with 30 years of eligible service could see the estimated monthly EPS pension rise from ₹6,857 under a ₹15,000 pensionable salary ceiling to ₹11,429 under a ₹25,000 ceiling. This is a 67% increase in the calculation.

However, the 67% figure should not be treated as an automatic increase for every EPS member.

The report notes that the maximum benefit in its calculation depends on completing five years under the new ₹25,000 wage ceiling. Employees who spend fewer years under the revised ceiling would have a lower pensionable salary for the calculation.

The change is therefore significant for HR teams as well as employees, particularly in payroll processing, statutory compliance and employee communication around retirement benefits.