EPF Scheme 2026: Key changes in nominations, PF withdrawals, and employer compliance - The Economic Times

The Employees’ Provident Funds Scheme, 2026 (EPF Scheme), notified by the Ministry of Labour and Employment on 29 June, and effective 1 July onwards, modernises and consolidates a series of changes introduced by the Employees’ Provident Fund Organisation (EPFO) over the last two years.While key features, such as the 12% contribution rate for employers and employees as well as the Rs.15,000 statutory wage ceiling, remain unchanged, the formalisation of several provisions will trigger new operational obligations. Employers and human resource (HR) leaders must act swiftly; these changes directly impact payrolls, employee documentations, exit procedures and contractor compliance.New rules for taking out money

Nomination: point of attentionAs per paragraph 44(3) of the 2026 scheme, any nomination made under the erstwhile EPF Scheme, 1952 is void to the extent it aligns inconsistently with the current one. Consequently, employees who are EPFO members must file fresh nominations under the new rules. In practice, they submit nominations during onboarding and rarely update them even after major events like marriage. Employers must treat this as a high-priority compliance and communications exercise. HR teams need to audit existing records, notify employees of the need to re-file where necessary, and facilitate a short re-filing drive to prevent disputes at the claim stage later.ALSO READ | New EPF Scheme, 2026: What existing and new PF subscribers should knowContribution leeway, wage definitionThe scheme is clear that contributions above the statutory wage ceiling are voluntary and will depend on employer’s policy or mutual agreement. It also explicitly limits an employer’s statutory liability to the wage ceiling, a principle previously settled by judicial precedents but codified in the current scheme.Crucially, EPF contributions must be computed on ‘wages’ as defined under the Code on Social Security, 2020. Employers should immediately map existing salary structures and allowances against this statutory definition and review employment contracts/ policies. For many organisations, this mapping may trigger a one-time compensation restructuring, changes in payroll configuration and updated appointment terms where higher contributions are a voluntary contractual benefit. Large employers and multistate payrolls should plan this transition with adequate lead time to avoid payroll errors.Withdrawals: simpler, with changesThe scheme consolidates partial withdrawal categories and eases the threshold for membership duration - from five years to 12 months in some cases. It also accelerates settlement timelines: complete claims must be settled within 20 days (from 30 earlier). The restored option for physical claims, if online filing fails, offers a practical fallback for members in low-connectivity areas.Two key tightening measuresNew life insurance policies cannot be financed from EPF balances, but premiums for existing ones may still be paid from EPF accounts.The waiting period for withdrawing PF upon leaving employment has been extended from two months to 12. Employers must update exit communications and payroll FAQs so that departing employees set expectations correctly.ALSO READ | Higher take-home salary or bigger retirement corpus? How the proposed EPF change could affect your futureImpact on international workersParagraph 9(6) expressly addresses United Kingdom nationals covered by the India-UK social security arrangement (SSA); workers who opt for detachment will have contributions calculated on ‘total wages’ as defined in the Code.For other international workers, the scheme does not explicitly state whether contributions should be computed on the statutory ceiling or the full salary—which, in an ideal scenario, should be computed on ‘total wages’ as defined in the code. Employers with expatriate or inboundassignee population must adopt a clear interim payroll position and monitor EPFO/Labour Ministry FAQs and circulars for definitive guidance to ensure consistent treatment.Contract labour: liability documentedAs was in the 1952 scheme, principal employers are liable for PF contributions of contractual workers. What changes is the reporting regime: principal employers must declare engaged contractors in Form X; contractors must report each contractual employee’s UAN, wages and contribution details in Form XI within 10 days of the month-end; and principal employers must file a consolidated Form XII within 20 days of the month-end, on the EPFO portal. Contractorheavy businesses need a swift process change, entailing centralised record-keeping, monthly reconciliations, and integration with payroll and contractor billing systems to meet timelines.Operational prioritiesTo align with the new scheme without disruption, employers should prioritise:Nomination audit and re-filing: Identify inconsistent/ missing nominations, and run employee communication and filing campaigns.Wage definition mapping: Reconcile salary components with the Code’s wage definition and update payroll templates, employment terms, and contribution workflows.Contractor compliance calendar: Embed Form X/XI/XII timelines into monthly payroll cycles and automate data collection from contractors.Exit communication update: Revise settlement and withdrawal guidance to reflect the 12-month waiting period and the restored physical-claim option where required.Expatriate payroll guidance: Set an interim position for non-SSA international workers and track Ministry/EPFO clarifications.A practical way forwardA clarificatory circular or FAQ on contribution treatment for international workers beyond the UK SSA carve-out would aid faster, consistent compliance. For employers, early employees’ communication drive, payroll reconfiguration and contractor data flows will lower inspection and claim risks, making the scheme’s benefits accessible to members without operational friction. Overall, the new scheme consolidates existing reforms and adds targeted operational requirements. Employers that act promptly on nominations, wage-definition alignment, contractor reporting and exit communications, will convert the transition into a governance upgrade rather than a compliance scramble.The Author is Partner, Deloitte India(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)