The Employees’ Provident Fund Organisation (EPFO) recently revised the wage ceiling for employees’ and employers’ monthly contributions from Rs 15,000 to Rs 25,000.
Employees earning Rs 15,000-Rs 25,000 who were EPF members but not in the EPS must now join it, so the employer’s 12% contribution will be split between the two schemes.
Contributions rise for some employees, take-home pay may fall, and employer costs go up.
So, if your basic salary or PF wages are Rs 20,000 a month, how much will you and your employer contribute to EPF? What happens to the employer’s pension contribution if you are not eligible for EPS?
Here’s what the EPFO rule says.
Earning Rs 20,000? Your PF calculation changes from October: What happens if you’re not an EPS member
EPFO, via its social media handle X, has shared guidelines for employers on pension contributions. The organisation has also urged employers to check EPF wages for every new employee joining an establishment.
If wages are Rs 25,000 or less, EPS pension contribution shall be deducted mandatorily, whereas if wages are more than Rs 25,000, the employer should verify previous EPS membership in the UAN of the employee.
If an employee was an EPS member earlier, contribution to EPS shall be mandatory, whereas if the employee is not a previous member of EPS, no contribution to EPS shall be made.
If an employee is earning Rs 20,000, 12% of basic, which is Rs.2400 was initially being contributed to EPF as your own contribution, met by the same amount of contribution by your employer. The whole amount was invested in EPF.
From October, out of Rs.2400 of your employer’s contribution, Rs.1666 will go to EPS and the balance (Rs.734) will go to EPF.
| Contribution | Rate | Amount |
| Employee’s EPF contribution | 12% | Rs 2,400 |
| Employer’s contribution towards EPS | 8.33% | Rs 1,666 |
| Employer’s contribution towards EPF | 3.67% | Rs 734 |
| Total | 24% | Rs 4,800 |
While the employer’s 12% contribution is divided between EPF and EPS as appropriate, the employee’s 12% contribution remains.
Examples of contributions for different EPFO schemes and salary structures starting with the October wage month.
| Monthly PF Wages (Basic + DA) | Employee Share: EPF (12%) | Employer Share: EPS (8.33%) | Employer Share: EPF (3.67%) | EDLI Contribution (0.5%) | EPF Admin Charges (0.5%) |
| Rs 10,000 | Rs 1,200 | Rs 833 | Rs 367 | Rs 50 | Rs 50 |
| Rs 15,000 (Old Cap) | Rs 1,800 | Rs 1,250 | Rs 550 | Rs 75 | Rs 75 |
| Rs 20,000 (New Bracket) | Rs 2,400 | Rs 1,666 | Rs 734 | Rs 100 | Rs 100 |
| Rs 25,000 (New Cap) | Rs 3,000 | Rs 2,083 | Rs 917 | Rs 125 | Rs 125 |
| Rs 35,000 (Above Cap) | Rs 3,000 | 0* | Rs 3000 (@12%) | Rs 125 | Rs 125 |
Only employees whose wages on the day of joining or the date the new wage ceiling was implemented do not exceed the wage limit, which is Rs 25,000 per month as of September 17, 2026, are eligible to become members of EPS.
Earn Rs 20,000? How the new EPF wage ceiling changes your PF
The contribution calculation for September 2026 for an employee with a monthly salary of Rs 20,000 is as follows:
| Contribution Head for September 2026 | Scenario A: Existing employee who becomes a member from 17.09.2026 | Scenario B: Existing Member (EPF & EDLI only) contributing on Rs 20,000 Newly Enrolled in EPS from 17.09.2026 | Scenario C: Existing Member (EPF, EPS & EDLI) Contributing on Rs 15,000 Cap till 16.09.2026, Moving to Rs 20,000 from 17.09.2026 |
| Proportionate wages for 01.09.2026 to 16.09.2026 i.e. 16 days | Rs 0 (Excluded employee till 16.09.2026; wages exceeded Rs 15,000 ceiling) | Rs 10,666.67 (Rs 20,000 × 16/30) | Rs 8,000.00 (Rs 15,000 × 16/30) |
| Proportionate wages (17.09.2026 to 30.09.2026) | Rs 9,333.33 (Rs 20,000 × 14/30;) | Rs 9,333.33 (Rs 20,000 × 14/30) | Rs 9,333.33 (Rs 20,000 × 14/30) |
| Total September Wage (EPF) | Rs 9,333.33 | Rs 20,000.00 | Rs 17,333.33 |
| Total September Wage (EPS) | Rs 9,333.33 | Rs 9,333.33 | Rs 17,333.33 |
| Employee Contribution EPF (12%) | Rs 1,120.00 (12% of Rs 9,333.33) | Rs 2,400.00 (12% of Rs 20,000.00) | Rs 2,080.00 (12% of Rs 17,333.33) |
| Employer contribution EPF (A/c 1) | Rs 342.53 (3.67% of Rs 9,333.33) | Rs 1,622.53 (12% on Rs 10,666.67 + 3.67% on Rs 9,333.33) | Rs 636.13 (3.67% of Rs 17,333.33) |
| Employer contribution EPS (A/c 10) | Rs 777.47 (8.33% of Rs 9,333.33) | Rs 777.47 (Rs 0 in Period 1 + 8.33% on Rs 9,333.33 in Period | Rs 1,443.87 (8.33% of Rs 17,333.33) |
| Employer EDLI (A/c 21 – 0.50%) | Rs 46.67 (0.50% of Rs 9,333.33) | Rs 100.00 (0.50% of Rs 20,000.00) | Rs 86.67 (0.50% of Rs 17,333.33) |
| Admin Charges (A/c 2 – 0.50%) | Rs 46.67 (0.50% of Rs 9,333.33) | Rs 100.00 (0.50% of Rs 20,000.00) | Rs 86.67 (0.50% of Rs 17,333.33) |
| Total Statutory Remittance for September in respect of member | Rs 2,333.34 | Rs 5,000.00 | Rs 4,333.34 |
Source: EPFO
For someone earning Rs 20,000, if your EPF contribution was capped at Rs.15000, now the employee contribution would increase from Rs.1800 to Rs.2400 and your in hand pay drops by this amount of Rs.600 (2400-1800).
Like stated earlier too, if you were contributing on your full wage, there will be no change in your take home package. The internal split between EPS and EPF would change as shared above.
For someone earning Rs.25000, the contribution would go further up with higher impact on the take-home salary, as the mandated contribution would be Rs.3000 ( 12% of 25000) as against Rs.1800 earlier. The employer’s contribution would further contribute Rs.2083 to EPS and the balance to EPF.
What do workers gain and what do they give up?
For most workers earning below Rs.25000, this change should improve their retirement savings in a meaningful way.
“Yes, the short term impact of lower take home pay needs to be assessed in light of how the monthly budget and cash flows pan out, as this could be restricting their current lifestyle,” said Arti Arora, Senior Vice President, Bajaj Capital.
The main advantage here is that your employer puts in money alongside your contribution. For ex – your basic pay is Rs. 25000 but you were contributing at the ceiling level of Rs.15000.
Earlier, the employer was contributing Rs. 1800, while now the contribution will increase to Rs. 3000, a 1200 increase in the overall contribution month on month that compounds over your working life to reap you a decent corpus and pension at retirement.
The only flip side here would be your employer adjusting your CTC so that their increase in contribution is netted out, or if your current cash flow situation is already stretched and cannot accommodate more strain.
Key takeaway
There would be an impact on monthly take-home salary if the contribution earlier was being calculated at the earlier ceiling amount of Rs.15000.
For workers with basic wages between Rs.15000 and Rs.25000, there will be a higher EPF deduction, and they are the ones impacted heavily if they were contributing up to the ceiling limit.
For those contributing on their full wage, there will be no change.
Workers earning above Rs.25000 may see a higher minimum deduction if they were contributing as per the salary ceiling, which has now been enhanced from Rs.15000 to Rs.25000 as their deduction would increase from Rs.1800 (12% of Rs.15000) to Rs.3000 (12%*25000).
Employees need to check their salary slips and EPFO accounts from October to ensure their employer is correctly calculating and depositing the revised PF contribution.
Your PF deduction should be 12% of your basic pay up to Rs.25000. So, PF deduction would be Rs.2400 on Rs.20000 basic and Rs. 3000 on basic pay of Rs.25000. If it still shows Rs.1800 deduction, you must check with your employer.
If your CTC includes your employer’s PF share, you can also check if any other allowance was reduced to make up for the required higher contribution.
Disclaimer: This article is for informational purposes only and should not be construed as investment, financial, tax, or legal advice. Any illustrations, examples, or return projections used in this article are for explanatory purposes only and do not guarantee actual investment outcomes. The views and opinions expressed by experts quoted in this article are their own and should not be considered investment recommendations. Readers should consult a qualified professional before making any financial decisions.
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