May 09, 2023

Social Security Code Provisions pertaining to Pension on Higher Wages Notified

The Indian Ministry of Labour and Employment (“MOLE”) has recently issued two notifications on May 3, 2023 in connection with the Hon’ble Supreme Court of India’s (“SC”) judgement dated November 4, 2022 in the matter of Employees’ Provident Fund Organisation and others v. Sunil Kumar B. and others (“November Judgement”).

As you may recall, in the November Judgement the SC upheld the validity of the Employees’ Pension (Amendment) Scheme, 2014 (“2014 Amendment”) which was brought into effect on September 1, 2014 (“Cut-off Date”), while reading down certain provisions of the 2014 Amendment. Previously, we sent an alert about the key aspects of the 2014 Amendment and the November Judgment, which is available here.

The SC, while upholding the validity of the 2014 Amendment, read down provisions of the 2014 Amendment pertaining to the contribution to the Employees’ Pension Scheme, 1995 (“EPS”) by the employees of an additional 1.16% of monthly salary exceeding the wage ceiling prescribed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) which is currently Rs. 15,000 per month.

In the November Judgment, the SC suspended the operation of the abovementioned part of the judgment for 6 (six) months to allow the authorities to consider the necessity of bringing appropriate amendments to the EPS in order to generate the additional contribution of 1.16% from some other legitimate source within the scope of the EPF Act. This was largely due to the reason that the EPF Act does not require employees to make any contribution to the EPS nor does it empower the authorities to demand additional contribution from employees.


In the aforesaid backdrop, the MOLE has issued 2 (two) notifications on May 3, 2023.

    • The additional contribution of 1.16% to the EPS shall be required to be borne by the employer. Accordingly, in respect of employees who have exercised joint option to contribute to EPS on monthly salary higher than the wage ceiling under the EPF Act, the employer’s contribution to the EPS will now be 9.49% of basic wages, dearness allowance and retaining allowance instead of the current contribution of 8.33%.
    • The additional contribution of 1.16% will be applicable to basic wages, dearness allowance and retaining allowance to the extent they exceed the wage ceiling of Rs. 15,000 per month.
    • The notification has been made effective retrospectively from September 1, 2014.

In a related press release, the MOLE appears to clarify that the 1.16% additional contribution will be drawn out from the overall 12% of the contribution to be made by the employers under the EPF Act. This, however, implies that for this specific category of eligible employees, the employer’s current contribution of 3.67% under the Employees’ Provident Funds Scheme, 1952 will stand proportionately reduced which may have a consequent financial impact on such employees’ provident fund corpus.

  • The second notification identifies that the applicable provisions of the Code on Social Security, 2020 (“SS Code”) to implement the aforementioned amendments, would be in force effective from May 3, 2023. Accordingly, the corresponding provisions of the EPF Act shall stand repealed and subsumed. As you may be aware, the SS Code provides for repeal of the EPF Act once the provisions of SS Code are brought into effect.

New deadline to opt for pension on higher wages

Separately, through its November Judgement, the SC had provided a period of 4 (four) months to the eligible employees for exercising the joint option to contribute to EPS on monthly salary higher than the wage ceiling under the EPF Act. The Employees’ Provident Fund Organisation had initially extended the deadline until May 3, 2023 which has now been further extended to June 26, 2023.




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