Labour Ministry decides not to raise basic salary to expand the scope of EPFO


The Ministry of Labour and Employment of India recently declared that it will not be raising the basic salary limit to Rs.21,000 per month. This plan to extend the salary limit from Rs.15,000 to Rs.21,000 was a recommendation that was made in order to extend the magnitude of Employees Provident Fund (EPF) for more employees, and to provide individuals (who are not currently covered) with Provident Fund (PF) as well as pension. The central board of the Employees Provident Fund Organization (EPFO) had accepted this recommendation. However, this suggestion was not taken by the labour ministry.


The Union Government of the country has decided to not go ahead with the plan of increasing the social security net for employees who work in the organised sector. This is being done specifically to minimise the onus on the government. Moreover, an implementation of this strategy would actually result in higher expenses for the government.

As of now, employees belonging to the organised sector who earn an income of Rs.15,000 every month are covered under the EPFO on a compulsory basis. These employees are also entitled to pension and PF benefits. If the salary cap had been increased to Rs.21,000 per month, then an additional 6 million employees would have been able to obtain social security. However, if the government had proceeded with this particular plan, the government may have incurred costs of up to Rs.3,000 crore in a year.

An official from the labour ministry said that this would not be a good move for the government currently. The official also said that due to firm monitoring of costs, the ministry does not even want to increase the present minimum monthly pension limit from Rs.1,000 to Rs.3,000.

The government is working judiciously towards administering different expenses as there is no adequate fiscal flexibility at the present time for increasing investments in the workforce of the nation.


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