New Delhi, Sept. 17 -- The Union Cabinet on Wednesday approved raising the wage ceiling for mandatory coverage under the Employees' Provident Fund Organisation (EPFO) from Rs.15,000 to Rs.25,000 a month, a move that will bring more than 5.1 million additional employees under the statutory social security system, according to a government release. The revised ceiling will come into force from September 17. The number of workers covered could eventually be much higher. "It can go up to 10 million," a senior labour ministry official said. The move will cover employees earning between Rs.15,000 and Rs.25,000 a month. Under the existing system, a fresh employee joining a covered establishment at a wage above Rs.15,000 is not automatically brought under mandatory EPFO coverage. "Under the revised ceiling, employees earning Rs.15,000-Rs.25,000 a month will come within the mandatory social security framework. They will get provident fund savings, pension and insurance protection," the senior official said. The move will also increase the cost for employers. "The additional burden on the employer will be Rs.600 per employee for a worker earning Rs.25,000 a month," the official said. Both the employee and the employer will contribute 12% each under the revised ceiling. The pension contribution under EPS will rise to Rs.2,080 a month from Rs.1,250, while the Centre will continue to contribute 1.16% towards the pension The wage ceiling had remained unchanged at Rs.15,000 since September 2014. The government said the revision was needed as wages, minimum wages and living costs have risen considerably over the past 12 years. According to the official cited above, "Today, the average income of a regular salaried employee is around Rs.23,000, and that minimum wages, including for unskilled workers, in several states have moved above Rs.15,000... the existing ceiling had therefore become increasingly out of line with prevailing wage levels." The last revision, in September 2014, had raised the ceiling from Rs.6,500 to Rs.15,000. The higher ceiling will extend mandatory social security to the Rs.15,000-Rs.25,000 wage band. The benefits include savings under the Employees' Provident Fund, pension protection under EPS and insurance cover under the Employees' Deposit Linked Insurance Scheme (EDLI), subject to the applicable scheme provisions. The ministry described the move as "a big step" towards providing social security to workers under the Labour Codes and said it would promote formalisation of employment. The move will also increase the government's financial commitment to EPFO. The annual government outgo is estimated at Rs.11,339 crore, compared with existing annual budgetary support of about Rs.10,250 crore, according to the government release. This is an increase of Rs.1,089 crore a year. The estimated expenditure over five years is Rs.56,696 crore. The latest EPFO data cited by the government show around 79.8 million contributing members across about 768,000 contributing establishments. The EPS provides pension benefits to around 8.2 million pensioners, while EDLI provides insurance protection linked to EPF membership. The government has positioned the increase as part of its broader formalisation push. "Wider social-security coverage will help employee retention, workforce stability and morale," the ministry note said. The decision comes as the government seeks to expand statutory social security alongside the growth in formal employment and wages. Puneet Gupta, Partner, People Advisory Services-Tax, EY India, flagged concerns around the immediate impact on both employers and employees. "Organisations with a large number of employees in the Rs.15,000-Rs.25,000 wage band will see an immediate impact on costs and will have to manage employee communication appropriately because of the higher employee contribution and drop in take-home salary," he said. On concerns over how it will affect in-hand amount of salaried people, he said employers may not be able to adjust the additional employer EPF contribution in employees' salary or CTC, as Section 124 of the Code on Social Security (CoSS) may restrict them from doing so....