New Delhi: The Ministry of Labor and Employment has given clear instructions to the companies that after the implementation of EPFO ​​wage ceiling 25000, the legal salary of the employees should not be reduced. On September 17, the government had increased the salary limit under EPFO ​​from Rs 15,000 to Rs 25,000. Its objective is to bring more than 1 crore additional employees under the ambit of mandatory coverage and make the workforce more formal.

But after this decision, an apprehension was being raised that employers may adjust their share of contribution from the 'Cost-to-Company' (CTC) of the employees. To remove this apprehension, the Ministry has now issued clear instructions to the companies.

What can't companies do?

The ministry has said that the employer's statutory contribution cannot be treated as employee's deduction merely by making it a part of 'cost-to-company' (CTC). Employers must also ensure that employer statutory contributions are made correctly and that employees' statutory wages are not reduced contrary to applicable law. The ministry suggested that employers consider their share of social security contribution as a way of better human resource practices, employee satisfaction and retention.

way to reduce burden

In the frequently asked questions (FAQs) issued, the ministry acknowledged that there will be an anticipated increase in costs to employers. But the ministry says employers can reduce this additional financial burden to some extent with incentives of up to Rs 3,000 per month for every additional employment under the 'Pradhan Mantri Vikas Bharat Rozgar Yojana' (PMVBRY). Additionally, formalizing the workforce also improves India's image as an investment destination.

Fears over take-home salary dispelled

On the possibility of reduction in 'take-home salary' i.e. the salary coming in hand, the ministry clarified that due to increase in the salary limit, any increase in the share of employees in EPF continues to provide better interest. There is tax benefit. This leads to a guaranteed pension and free insurance coverage, which is a small compromise for lifelong security.

epfo wage ceiling 25000: quick instructions for employers

The ministry directed employers to immediately initiate review of the cases of affected employees and not wait for the next payroll cycle. The ministry said – the most important work is: identifying, counting, enrolling, reporting, depositing and matching.

It was also made clear that it will be necessary for all eligible employees with salary more than Rs 15,000 and less than Rs 25,000 to become members of 'Employees Pension Scheme' (EPS). The employee's mandatory 12% contribution will go entirely to EPF, while the employer's 12% contribution will be divided into two parts — 8.33% to EPS and the rest to EPF.

Overall, the government's message is clear — the benefits of the increased EPFO ​​limit should reach the employees, and its cost should not be taken out of the employees' salaries.