New Delhi: The Centre is mulling a proposal to hike the minimum wage limit from Rs 15,000 at present in a move that is likely to benefit EPFO subscribers in a big way. A hike in basic salary limits will translate into higher contributions to their PF account.
PF subscribers currently contribute 12 per cent of their basic pay to the PF account. The employer matches this contribution, of which a major chunk goes towards pension. The minimum wage cap is technically called the Minimum Wage Ceiling.
Benefits of higher minimum wage ceiling
A higher minimum wage ceiling willoffer triple benefits to employees, according to an ET report. A MWC hike to Rs 21,000 from Rs 15,000 at present will result in higher basic salaries for employed individuals. Further, a higher minimum wage will translate into higher PF contributions. Continuing these contributions will mean higher pension payout at the end of one’s active working life, according to the report.
PF contribution calculations
If the minimum wage is Rs 15,000, the PF contribution is Rs 1,8,00. the employer contributes Rs 550.50 (3.67 per cent) and the employee’s pension system contributions stand at Rs 1,249.5 (8.33 per cent). A Rs 21,000 minimum wage will result in PF contributions worth Rs 2,520, employer contributions worth Rs 770.70 and EPS contributions worth Rs 1,749.30.
Smaller firms to join EPFO?
The Centre is also likely planning to include smaller firms in EPFO by lowering the eligibility limit for such firms. Currently, a company with a minimum of 20 employees are eligible for taking PF contributions. The government may soon cut this figure by 20 paving the way for pension security to a wider number of workers.
While smaller companies were not required to have PF contributions earlier, those with 10-15 staffers may now be required to make such contributions going forward. The Centre had last hiked the Basic Minimum Wage to Rs 15,000 from Rs 6,500 in 2015. The latest proposed changes may be implemented almost 10 years later, according to the report.
Minimum Wage revision: The Centre is likely to revise upwards the basic minimum wage for employed individuals to Rs 21,000 from Rs 15,000 at present, according to reports, Know how this will affect your PF corpus. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
