India's Union Cabinet has approved an increase in the wage ceiling for mandatory coverage under the Employees’ Provident Fund Organisation (EPFO) to ₹25,000 a month from the previous ₹15,000. The decision, announced on Wednesday, September 16, 2026, will take effect from September 17, coinciding with Vishwakarma Jayanti.
This move is expected to bring more than 51 lakh additional employees under the EPFO's umbrella, expanding access to provident fund savings, pension protection under the Employees’ Pension Scheme (EPS), and insurance protection under the Employees’ Deposit Linked Insurance Scheme (EDLI). The annual government expenditure for this initiative is projected to rise to ₹11,339 crore, up from the current ₹10,250 crore.
Union Labour Minister Mansukh Mandaviya highlighted that the average salary in private establishments is ₹23,000, according to a government survey. He noted that the employers’ contribution per employee will increase by ₹600, while employees will see their contribution to the EPS rise to ₹2082.5 per month, which is 8.33% of the new wage ceiling.
However, the decision has received mixed reactions. Employers' organizations have welcomed the announcement but have called for government assistance to implement it. Trade unions, on the other hand, have criticized the increase as insufficient and overdue. Amarjeet Kaur, general secretary of the All India Trade Union Congress, argued that the ceiling should have been raised to at least ₹30,000, considering inflation. She expressed concerns that employees might see a reduction in their take-home pay and urged the government to ensure that employers transparently pay their share without shifting the burden onto employees.
K. E. Raghunathan, national chairman of the Association of Indian Entrepreneurs, emphasized the need for the EPFO's software to be upgraded to handle the anticipated increase in subscribers. He pointed out that many employers, particularly in the MSME sector, are already struggling financially and may find it challenging to absorb the additional costs. Raghunathan suggested that the government should cover this increase for two years for MSMEs to prevent them from opting for gig work arrangements over formal employment.
Despite these concerns, some industry leaders see the decision as a positive step. Suchita Dutta, executive director of the Indian Staffing Federation, described the wage ceiling increase as a structural gain for formalization. She noted that it narrows the cost differences that unorganized players exploit, thereby rewarding compliant employers and accelerating the shift from informal to formal employment. Dutta added that the decision reinforces staffing as a key driver in converting India's informal workforce into one with formal coverage and security.
While the reform is seen as long overdue by some, it is also recognized as an important investment in India's workforce. Raghunathan acknowledged that there might be a short-term increase in operating costs, particularly for manufacturing and MSMEs, but emphasized that stronger social security for workers is a crucial long-term investment.
