The Union Cabinet approved the hike on Wednesday, moving the mandatory coverage threshold from Rs 15,000 to Rs 25,000 per month. This decision, driven by the Ministry of Labour & Employment, immediately absorbs 51 lakh workers who previously sat just above the limit. Those earning between the old and new ceilings were effectively invisible to the statutory social security system.
It’s a rare update. The last change happened in September 2014, when the cap jumped to Rs 15,000. Before that, it had been frozen since 2004. Wages have climbed significantly in the decade since, with minimum wages in several states creeping toward that old Rs 15,000 mark. The new ceiling reflects that reality, pulling mid-level earners into the fold.
The financial impact is substantial. The government’s annual outlay will rise to Rs 11,339 crore, a jump from the previous Rs 10,250 crore. Over five years, the cost lands at approximately Rs 56,696 crore. These figures were greenlit by the Expenditure Finance Committee at its June 16, 2026 meeting, following inter-ministerial consultations.
For the worker, this means automatic enrollment in provident fund savings, pension benefits under the Employees’ Pension Scheme (EPS), and insurance coverage via the Employees’ Deposit Linked Insurance Scheme (EDLI). Currently, 7.98 crore members contribute through 7.68 lakh establishments. The EPS supports 82 lakh pensioners. This expansion tightens the link between formal employment and portable security.
The move aims to formalize the labor market, improving retention and long-term retirement stability. Employers also benefit from a more stable workforce. The next step is implementation, with the new rates expected to apply to contributions calculated on the increased wage base.