A closer look, however, reveals that the changes to the Code on Social Security (CoSS), which includes the laws governing the Employees’ Provident Fund (EPF), will not only check malpractice, help low-wage earners, and simplify withdrawals but will also mark continuity by keeping several provisions unchanged.

Wage Definition

The Code on Social Security, 2020 provides the new legal framework for provident fund, pension and insurance schemes, notified on 29 June 2026, in place of the schemes framed earlier under the EPF & MP Act, 1952.

Soon after the Codes were notified on 21 November 2025, many analysts warned that the CoSS would raise labour costs and cut take-home pay, since Employees’ Provident Fund (EPF) contributions are now payable on the broader “wages,” including allowances rather than the narrower “basic wages” of the EPF & MP Act, 1952. 

Some analysts also pointed out that the definition has shifted, from basic wages payable under contract terms to wages payable once those terms are fulfilled. Since wages actually paid when terms of contract are fulfilled cannot be less than the minimum wage, Provident Fund (PF) wage for calculating contributions is no longer purely a matter of contract between the employer and the employee; statutory wage requirements must now be factored in too. 

Earlier, the basic wage on which Provident Fund was paid could legally be less than the minimum wage, depending on the contract, but not now. 

This change will not raise the real liability — it will only check a malpractice.

The 50% Rule

It is correct that the Social Security Code treats allowances exceeding 50% of total remuneration as wages for PF contributions. What is incorrect is the assumption that allowances were excluded from PF earlier and are now newly brought in. 

The Supreme Court had already expanded the definition of basic wages, ruling that allowances paid universally to all employees are basic wages and not exempt from PF. Performance-linked and variable allowances remain excluded under both regimes. 

Most allowances companies pay are, in practice, paid across the board to all employees within a category — selective allowances paid to a few and not to all employees are rare. So, the rule on allowances remains unchanged, adding no extra burden on employers or extra deduction from employees’ salary.

The Wage Ceiling

The EPF Scheme, 2026 retains the “excluded employee” concept based on the pay ceiling: PF membership remains mandatory only for employees earning up to ₹15,000 a month, and this ceiling also governs contribution calculation, limiting liability to the ceiling amount. Above it, both membership and contribution stay optional. For employees earning above the ceiling, CoSS and the EPF Scheme thus mean total continuity in employer liability and employee deductions. 

At the same time, the changed wage definition would help low-wage earners — those below ₹15,000 a month — by preventing the artificial wage-splitting by which some employers showed basic wage as under 10% of gross wage to cut PF liability. The requirement to contribute on minimum wage, together with the 50% rule discussed above, will check this malpractice and strengthen the PF corpus of the most vulnerable sections of employees. As Justice V.R. Krishna Iyer of the Supreme Court observed in the Organo Chemicals case, “Lazarus can ill-afford to lose even a little.” 

Rationalisation Of Fund Withdrawals

The EPF Scheme, 2026 simplifies withdrawals and other member services while continuing to protect the retirement corpus.

The earlier Scheme had numerous categories of partial withdrawal, each with a different purpose, eligibility period and limit; the new Scheme rationalises these into broader heads — illness, education, marriage, and housing — with a uniform 12-month qualifying period across all of them.

Earlier, the withdrawal amount was often restricted to a single share, a percentage of the employee’s own contribution. The new framework introduces an “eligible member balance”: 75% of the total accumulated balance, both shares included, is now available for partial withdrawal, with 25% retained as a floor against exhausting retirement savings. 

This logic extends to early exit from employment too: earlier, a member leaving before retirement could withdraw the full balance after a two-month wait; now 75% is available immediately, the remaining 25% only after a year of continuous unemployment. 

On the pension side, members leaving before completing 10 years of pensionable service could earlier claim the withdrawal benefit after two months. This wait has now been extended to three years.

Digital Compliance

The new schemes make online filing of returns and claims the norm. To support this, the Employees’ Provident Fund Organisation’s (EPFO’s) IT system has been upgraded to move member records from establishment-linked accounts to a single, centralised account. 

Earlier, a new PF account was opened with each change of job, and funds had to be moved between accounts through a transfer claim, causing administrative delay and hassle. The current initiative maintains a single account through a member’s entire working life, eliminating the need for fund transfers altogether. 

A member can now access services from any EPFO office, without approaching the specific office that maintains their account — an important step towards making EPFO simpler, more portable and member-centric. 

Complete relief on the compliance front, however, will come only with the implementation of Project EPFO 3.0.

(The writer is a former Additional Central Provident Fund Commissioner, EPFO. He is now the Founder-CEO of EzyGovern Strategic Solutions. Views expressed are personal.)