EPF in payroll software after the ₹25,000 wage ceiling: contributions, ECR and what to test

From 17 September 2026 the EPF wage ceiling is ₹25,000 a month, up from ₹15,000, which had applied since September 2014 and was re-notified under the Code on Social Security by S.O. 2702(E) of 29 May 2026. The new ceiling was notified by S.O. 5109(E) of 17 September 2026 under section 2(89) of the Code, for Chapter III (EPF, EPS and EDLI), with effect from its publication in the Gazette. Mandatory contributions remain 12% from the employee and 12% from the employer on wages up to the ceiling, with part of the employer share going to the pension scheme (EPS) and the employer also paying EDLI and administration charges. Since the EPF Scheme, 2026 (notified on 29 June 2026 under the Code on Social Security), contributions are based on the code definition of wages, including the 50% rule, and contributions above the ceiling are voluntary and reported separately. Payroll software must handle all of this, plus the month of September 2026, which was reported as split into two periods in one ECR.

This guide is part of the payroll and HR software comparison overview. Confirm current procedure in EPFO circulars and FAQs before you change payroll.

What changed for PF in 2026

How the contribution is calculated

Illustrative example A, wages within the ceiling. Gross ₹32,000: basic + DA ₹16,000, allowances ₹16,000. Half of remuneration = ₹16,000, and exclusions are not above it, so code wages = ₹16,000.

How EPFO applies the EPS share to wages between ₹15,000 and ₹25,000, and to existing members, should be confirmed from its circulars; employees earning between those amounts who were EPF members but outside EPS were reported to become EPS members from 17 September 2026, subject to conditions.

Illustrative example B, wages above the ceiling. Code wages ₹40,000. Mandatory contributions are on ₹25,000: employee 12% = ₹3,000, employer 12% = ₹3,000. If the employer previously contributed on the full ₹40,000 (₹4,800 each), the ₹1,800 on the excess is now a voluntary contribution that must be shown separately. Decide the policy with your adviser and configure it per employee.

Illustrative example C, the 50% rule raising PF. Gross ₹40,000, basic ₹12,000. Code wages become ₹20,000 (see the labour codes guide). Employee PF rises from ₹1,440 to ₹2,400, and the employer share rises by the same ₹960.

September 2026: one ECR, two periods

Reports of EPFO's FAQs describe a single ECR for September 2026, with contributions calculated for 1–16 September under the ₹15,000 ceiling and 17–30 September under ₹25,000. Where extra employee contributions could not be deducted from September salary, employers were reported to be allowed to recover them in the next payroll, while still depositing the full September amount by the due date. Your software should:

• prorate wages and ceilings by days for the split month;
• record any shortfall recovered in October separately;
• produce the ECR in the format EPFO accepts for that month.

If your vendor could not do this, check whether the September ECR you filed was correct and whether a supplementary filing is needed.

What the software must produce

1. Monthly ECR (electronic challan cum return) for upload on the EPFO employer portal, with UAN-wise wages, EPF, EPS and EDLI wages.
2. Payment by the 15th of the following month, the long-standing due date; delays attract interest and damages.
3. New joiner handling: UAN generation or linking, nomination, and exemption checks for employees above the ceiling at joining.
4. Exit dates updated so members can withdraw or transfer.
5. Arrears: when salaries are revised with retrospective effect, PF on arrears.
6. Separate statutory and voluntary PF lines in payroll records and the remittance, as required under the 2026 Scheme as reported.
7. International workers and excluded employees flagged correctly.

Demo tests for EPF

• One employee with wages of ₹14,000, one of ₹22,000 and one of ₹40,000.
• One allowance-heavy structure that triggers the 50% add-back.
• A mid-month joiner and a leaver in the same month.
• A salary revision with three months of arrears.
• The September 2026 split, if you are migrating historical data.

Compare the vendor's ECR with your own calculation line by line. Include these in your parallel run.

Cost and process impact

Raising the ceiling increases employer cost for employees with code wages between ₹15,000 and ₹25,000. Illustrative: for 40 such employees with average code wages of ₹21,000, the extra employer share is 12% × (₹21,000 − ₹15,000) × 40 = ₹28,800 a month, before EDLI and admin charges. Budget for it and explain the change to employees, whose take-home may fall while retirement savings rise.

Frequently asked questions

Is the EPF rate still 12%?

Yes, the standard rate remains 12% for employee and employer on wages up to the ceiling, with reduced rates for certain notified categories. Check EPFO for exceptions.

Can we keep contributing on full salary?

Contributions above the ceiling are voluntary. Your policy and employee agreements decide; software must show them separately.

Do employees earning over ₹25,000 at joining have to join EPF?

Mandatory coverage is tied to the ceiling, but existing members continue. Check EPFO's rules for exempted employees.

Where do we file the ECR?

On the EPFO employer portal, linked from EPFO.

Sources

• EPFO — EPF Scheme, 2026, wage ceiling FAQs, ECR
• Ministry of Labour and Employment — Code on Social Security and rules
• e-Gazette of India — S.O. 5109(E) of 17 Sep 2026 (gazette PDF) and G.S.R. notifications
• Press Information Bureau — Cabinet decision on the wage ceiling