The Labour and Employment Ministry has introduced a significant change under the new Employees' Provident Funds Scheme, 2026, making all contributions beyond the monthly wage ceiling of Rs 15,000 voluntary. This means that for employees earning above this threshold, contributions exceeding Rs 1,800 per month are no longer mandatory.
Key Changes in the New Scheme
Under the previous Employees' Provident Funds Scheme, 1952, employees with basic wages up to Rs 15,000 were mandatorily covered. Those earning above could opt in voluntarily. However, once covered, contributions were based on actual wages, often exceeding the wage ceiling. The new scheme, notified on Monday, alters this by limiting mandatory contributions to the wage ceiling.
The scheme states: "The contribution payable in respect of a member shall be subject to the wage ceiling limit, notified by the Central Government from time to time." It further specifies that where monthly wages exceed the wage ceiling, both employer and employee contributions are capped at the amount payable on the wage ceiling.
Impact on Employers and Employees
Previously, employers contributed 12% of basic wages, with 8.33% directed to the Employees' Pension Scheme (EPS) up to the wage ceiling of Rs 15,000 (Rs 1,250 per month). Any excess went to the EPF account. Under the new rules, contributions on wages above Rs 15,000 are voluntary. Employers may choose to contribute to the Pension Fund for higher wages only in cases permitted under the Employee's Pension Scheme, 1995.
According to the ministry, the amendment provides flexibility for both parties to opt for contributions based on the wage ceiling or actual higher wages. The wage ceiling of Rs 15,000 has been unchanged since 2014.
Background and Rationale
The change addresses long-standing demands from employers for reduced mandatory costs and from employees for greater control over their savings. The labour ministry has not issued an official comment on the overhaul. The new scheme is expected to impact millions of EPF members, particularly those in higher salary brackets.
