Social security coverage in India remains skewed towards the formal sector. Critically analyse with reference to recent EPFO reforms.

India's social security architecture is establishment-based, resting on laws like the EPF & Miscellaneous Provisions Act, 1952 that bind only registered firms. The Cabinet's September 2026 decision to raise the EPFO wage ceiling from Rs.15,000 to Rs.25,000 [1] deepens this net — but does not widen it.

Merits of the recent EPFO reform

• Extends mandatory EPF, EPS pension and EDLI insurance to over 51 lakh additional employees, the first ceiling revision since September 2014 [1].
• Corrects a silent exclusion: as wages rose against a frozen rupee ceiling, newly hired workers kept drifting outside pension and death-insurance cover [1].
• Fiscally sustainable — annual budgetary support rises only from ~Rs.10,250 crore to ~Rs.11,339 crore [1], roughly Rs.2,100 per new member.

Why the formal-sector skew persists

• EPF obligations apply only to establishments with 20 or more employees [1]; the Code on Social Security, 2020 retained such size thresholds instead of universalising cover [2].
• PLFS data show 52% of regular wage/salaried workers outside agriculture had no social security benefit at all [2].
• The ILO's World Social Protection Report 2024-26 places informal employment as high as 74% in South Asia [3] — street vendors, masons and small-shop workers gain nothing here.
• e-Shram registers unorganised workers but attaches no contributory benefit.

Critical concerns

• The 12% deduction reduces take-home pay for newly covered low-wage households, while the employer's matching 12% can push firms toward contractualisation or staying below the 20-worker mark.
• A fixed rupee figure goes stale within a decade, making coverage hostage to periodic Cabinet decisions rather than rule.

The reform is therefore welcome but partial — it raises the floor for insiders without opening the door to outsiders. Indexing the ceiling to wage growth and progressively removing establishment-size thresholds, as the Standing Committee on Labour urged in seeking universal social security "within a definite time frame" [2], would align EPFO reform with Article 41's promise of public assistance and SDG 1.3.