The Cabinet last month raised the wage ceiling eligibility for Employees Provident Fund (EPF) coverage by \u20b910,000, from the \u20b915,000 set in 2014, Union Information and Broadcasting Minister Ashwini Vaishnaw said.<\/p>\n
The hike, which comes after 12 years, seeks to \u201creflect sustained wage growth, rising incomes and continued expansion of formal employment <\/a>over the intervening years\u201d, the minister said.<\/p>\n Will your EPF contribution increase?<\/p>\n For employees whose EPF contribution was earlier restricted to the \u20b915,000 ceiling, the employee contribution can increase. See illustration below:<\/p>\n Earlier employee contribution: 12% \u00d7 \u20b915,000 = \u20b91,800\/monthNew employee contribution: 12% \u00d7 \u20b925,000 = \u20b93,000\/monthAdditional deduction <\/a>from salary: \u20b91,200\/monthPotential annual reduction in take-home pay: \u20b914,400Also Read | Iran war news LIVE: Iran tightens Hormuz control, vows to shut \u2018illegal\u2019 routes<\/a><\/p>\n The employer’s statutory contribution in such a case would also increase from \u20b91,800 to \u20b93,000. However, the actual impact on an employee’s take-home pay <\/a>will depend on how the employer structures the salary and calculates PF contributions.<\/p>\n How does this impact social security coverage?<\/p>\n The wage ceiling for membership to the Employees\u2019 Provident Fund Organisation (EPFO<\/a>) has been raised to \u20b925,000 per month, bringing an additional 51 lakh employees under mandatory provident fund cover, and widening social security coverage for workers.<\/p>\n Notably, the EPFO also administers pension under the Employees\u2019 Pension Scheme (EPS) and insurance protection under the Employees\u2019 Deposit Linked Insurance Scheme (EDLI). Hence, benefits under these heads are also likely to be enhanced.<\/p>\n The latest EPFO data shows around 7.98 crore contributing members across about 7.68 lakh contributing establishments, while the EPS <\/a>provides pension benefits to around 82 lakh pensioners.<\/p>\n Also Read | Goenkas’ RPSG bets on energy, chemicals, ITeS as its growth engines<\/a>EPS: Pension to be hiked?<\/p>\n The EPFO’s pension benefit is available to all subscribers who have had an account for more than 10 years. Under this, 8.33% of the 12% employer contribution to your EPF <\/a>account is directed towards your EPS account. Further, the government also contributes 1.16% (subject to wage ceiling) towards the fund.<\/p>\n Thus, with both the employer and government contributions subject to the wage ceiling, the total accumulated corpus towards your final pension will increase, subject to formula remaining unchanged. Notably, pension is calculated using the past five years average salary (subject to wage ceiling). So, to fully reap benefit of the higher bracket, you must have at least five years of service with the increased wage ceiling. Formula is as follows: Pension = (Pensionable Salary (average of last 60 months) x Pensionable Service) \/ 70.<\/p>\n EDLI: Insurance benefits could increase<\/p>\n As per the rules, EDLI <\/a>is calculated using the user’s monthly salary over the last 12 months, based on their applicable wage ceiling, plus a component tied to the average EPF balance. Under the previous wage ceiling, the maximum payout was \u20b97 lakh, as follows: ( \u20b915,000 (last 12 months wage ceiling) \u00d7 35 (years of service)) + \u20b91.75 lakh (assured payout) = \u20b97 lakh<\/p>\n Also Read | 5 money lessons from \u2018I Will Teach You to Be Rich\u2019 by Ramit Sethi<\/a><\/p>\n