A contract worker in an establishment with twenty or more employees must be a member of the Employees' Provident Fund if their wages are no more than ₹25,000 a month when they join. That ceiling has applied since 17 September 2026; before that date it was ₹15,000. Employer and worker each contribute 12%. The contractor usually files, but under the EPF Scheme 2026 the principal employer stays responsible for every contribution.
Which establishments and which workers are covered
The establishment is covered at twenty employees, and contract workers count toward the twenty. The First Schedule to the Code on Social Security 2020 applies Chapter III, the provident fund chapter, to every establishment in which twenty or more employees are employed. Section 2(26) defines an employee as a person employed by the establishment "either directly or through a contractor", and its second proviso adds that employees earning above the wage ceiling are also counted for coverage. A site with twelve direct staff and ten contract workers is therefore covered, whatever any of them earns.
Each worker is then tested once, at the point of joining. Paragraph 9(2) of the Employees' Provident Funds Scheme 2026 makes every employee of a covered establishment a member from the date of joining. Paragraph 2(1)(f) carves out the "excluded employee": one whose wage, when they would otherwise become a member, exceeds the ceiling notified under the Code. Three consequences follow for a contract workforce:
- Membership follows the worker, not the contractor. A worker who was a member under the 1952 Scheme continues as a member under the 2026 Scheme (para 9(1)) and keeps the same UAN across contractors and sites. A raise above the ceiling later does not end membership; it caps the mandatory contribution (para 18(3)).
- The wage tested is Code wages. Section 2(88) of the Code sets the definition, with the 50% add-back for allowances. A worker on a high gross with a low basic can still fall under the ceiling, as explained in the sibling article on the 50% wage rule.
- Above the ceiling is a choice, not a gap. Under paragraph 9(4), a worker and employer may jointly opt in writing to enrol an excluded employee, or to contribute on wages above the ceiling. The employer then pays the administrative charges on that higher base.
What the ₹25,000 ceiling changed on 17 September 2026
It changed two things: workers earning between ₹15,000 and ₹25,000 at joining now come into EPF, and existing members' capped contributions rise to the lower of their actual wages or ₹25,000. The Union Cabinet approved the change on 16 September 2026, and the Ministry of Labour and Employment notified it as S.O. 5109(E), effective 17 September 2026. The ceiling had not moved since September 2014, and the Supreme Court had directed the Centre in January 2026 to decide on a revision within four months. The EPFO's own briefing describes three effects: the higher contribution ceiling, enrolment of employees who were left out only because they earned above ₹15,000, and a maximum pension contribution of 8.33% of ₹25,000.
For a contract workforce, the band that moved is the one where skilled operators, forklift drivers and shift supervisors tend to sit in our own deployments. A contractor that onboarded those workers as excluded before 17 September now has to enrol them. A contractor that kept existing members capped at ₹15,000 now has to recompute their contributions. From the September 2026 wage month, both show up on the ECR [VERIFY: EPFO guidance on whether contributions for September 2026 are computed on the new ceiling for the whole month or only from the 17th].
How the contribution splits
The worker and the employer each pay 12% of wages, up to the ceiling. Of the employer's 12%, 8.33% goes to the pension scheme and the rest to the worker's provident fund account. Section 16(1)(a) of the Code sets a base rate of 10% that the Government can raise to 12% by notification for any class of establishment. Paragraph 18(2) of the 2026 Scheme sets 12% as the rule and keeps 10% only for classes the Government notifies. Section 16(1)(b) allows the pension share of up to 8.33%. Administrative charges and the deposit-linked insurance contribution are paid on top [VERIFY: rates under the EPF Scheme 2026 and the EDLI Scheme 2026, G.S.R. 526(E); 0.5% each under the 1952 and 1976 schemes].
| Contract worker's monthly Code wages | Worker's 12% | Employer's 12%: pension (8.33%) | Employer's 12%: provident fund (balance) |
|---|---|---|---|
| ₹14,000 | ₹1,680 | ₹1,166 | ₹514 |
| ₹22,000, member before 17 September (capped at ₹15,000 until then) | ₹2,640 (was ₹1,800) | ₹1,833 (was ₹1,250) | ₹807 (was ₹550) |
| ₹22,000, new joiner after 17 September | ₹2,640 (would have been excluded before) | ₹1,833 | ₹807 |
| ₹30,000, existing member (capped at ₹25,000) | ₹3,000 | ₹2,083 | ₹917 |
Each figure is rounded to the nearest rupee, with fifty paise rounding up, as paragraph 18(5) requires. One rule has no exceptions: the employer's share never comes out of the worker's wages. Section 17(3) of the Code bars a contractor from deducting the employer's contribution or the charges from a worker's pay, "notwithstanding any contract to the contrary", and paragraph 21 of the Scheme repeats the bar for every employer. A wage slip with two PF deductions is a contravention, whatever the contractor's rate card assumed.
Who pays: the contractor's code or the site's
That depends on whether the contractor is registered with EPFO in its own right, but either way the principal employer stays responsible. The 2026 Scheme defines the principal employer for the first time (para 2(1)(l)). In a factory, that is the owner, occupier or named manager. Paragraph 20 then splits the cases, and paragraph 20(4) closes both: "the principal employer shall remain responsible to pay contributions and administrative charges" for an employee employed through a contractor.
| Contractor's position | Code the workers sit under | Who remits, and when | Who answers to EPFO |
|---|---|---|---|
| Not registered independently | The principal employer's | The principal employer pays both shares and the charges within 15 days of month-end (para 20(1)). The contractor deducts the worker's share and pays it to the site with an equal amount (para 20(2)) | The principal employer, directly (para 20(3)) |
| Registered with its own code | The contractor's, with the contractor declared by the site in Form X (para 27(1)) | The contractor files the ECR and pays by the 15th (para 28(3)). It sends the site Form XI by the 10th (para 27(3)) | The contractor, jointly and severally with the principal employer (para 27(2)). The site stays responsible under para 20(4) |
| Either case, after a default | Unchanged | The site pays, then recovers from the contractor's bill or as a debt (Code s.17(1)) | The principal employer, for damages under para 23 and interest under Code s.127 |
This takes a step back from the older position. Under paragraph 30 of the 1952 Scheme, tribunals had held that a contractor with its own coverage was an independent employer, and that its dues could not be recovered from the site [VERIFY: CGIT/EPF Appellate Tribunal orders on para 30, seen only in search results this run]. The 2026 text makes the site jointly and severally liable even then. How that applies to a particular contract, and how much of a default the site can recover, is a question for the site's own counsel.
What the site files, and what a late month costs
The site has three new filings for its contractors, and late remittance costs damages of up to 1% a month on the arrears. Paragraph 27 of the 2026 Scheme sets out the filings:
- Form X, once, then on change. The principal employer ensures the establishment is registered and declares every contractor engaged on the EPFO portal (para 27(1)).
- Form XI, by the 10th. Each contractor tells the principal employer, electronically, the name, UAN, wages and contributions payable for every contract worker for the month just closed (para 27(3)).
- Form XII, by the 20th. The principal employer sends the Commissioner a monthly abstract of the total deducted from contract workers' wages and the total employer contribution paid for them (para 27(4)). Where the EPFO portal captures this data, the filing is treated as done (para 27(5)).
The sequence works as a monthly check. Form XI lands five days before the contractor's ECR is due, so the site can compare the contractor's UAN list with its gate register before the money moves. Then it can compare the ECR with Form XI before it files its own abstract. In our own engagements, that comparison is the core of the Management-stage evidence pack. The most common finding is a contractor's PF return that covers fewer people than walked through the gate.
| Period of default | Damages under para 23 of the EPF Scheme 2026 |
|---|---|
| Less than two months | 0.25% of the arrears per month |
| Two months to less than four months | 0.50% of the arrears per month |
| Four months or more | 1% of the arrears per month |
| Cap | Never more than the amount of the arrears (Code s.128; para 23(1)) |
How Velura Services helps
We enrol every eligible worker in EPF on an Aadhaar-seeded UAN before the first shift and remit both shares on time. We send your site Form XI and the ECR each month, so the principal employer can check contributions against the gate register.
Sources
- Code on Social Security, 2020 (Act 36 of 2020), Gazette text hosted by the Ministry of Labour and Employment. Sections cited: s.2(20) (contractor, including a sub-contractor); s.2(26) and its provisos (employee, including one employed through a contractor; employees above the wage ceiling counted for coverage); s.2(89) (wage ceiling); s.16(1)(a)–(c) (10% base rate, 12% by notification, pension share up to 8.33%); s.17(1)–(3) (recovery from the contractor; no deduction of the employer's share); ss.127–128 (interest and damages); First Schedule (Chapter III at twenty employees). Opened and read.
- Employees' Provident Funds Scheme, 2026, G.S.R. 525(E) dated 29 June 2026, mirrored copy of the Gazette of India Extraordinary. Paragraphs cited: 1, 2(1)(f), 2(1)(l), 9(1)–(4), 18(2), (3) and (5), 19, 20, 21, 23, 27 and 28(3). Opened and read [VERIFY: against the e-Gazette original, Gazette ID CG-DL-E-01072026-273957].
- Ministry of Labour and Employment, "Cabinet Approves Higher EPFO Wage Ceiling of Rs. 25,000, Expanding Mandatory Coverage", PIB Delhi, 16 September 2026. Covers the effective date of 17 September 2026, the ceiling being unchanged since September 2014, and the estimate of 51 lakh additional employees. Opened and read.
- PIB Kolkata, "EPFO Raises Wage Ceiling from Rs. 15,000 to Rs. 25,000; Over 51 Lakh Workers to Benefit", Release ID 2313829, 23 September 2026. Covers S.O. 5109(E), the 17 September 2026 effective date, and the rise in the maximum employer pension contribution from ₹1,250 to ₹2,083. Opened and read.
- PIB Imphal, "EPFO Wage Ceiling Enhanced from ₹15,000 to ₹25,000 per Month", Release ID 2314111, 23 September 2026. Covers contributions on ₹25,000 or actual wages, whichever is lower; enrolment of employees previously excluded only on wages; and the 8.33% of ₹25,000 pension cap. Opened and read.
- Ministry of Labour and Employment notification S.O. 5109(E) dated 17 September 2026, under s.2(89) of the Code on Social Security, 2020 [VERIFY: Gazette text not opened; number and date taken from the PIB release above].
- Employees' Pension Scheme, 2026 (G.S.R. 527(E)) and Employees' Deposit-Linked Insurance Scheme, 2026 (G.S.R. 526(E)), both dated 29 June 2026 [VERIFY: neither text opened this run; notification numbers from secondary summaries].
- All India Radio News, "Supreme Court directs Centre, EPFO to decide on revision of EPF's wage ceiling within four months", 6 January 2026. Used for context and the date only.