ESI Applicability Redefined — What Employers Must Know After 21st November 2025
Labour Law · ESI Compliance ESI Applicability Redefined — What Employers Must Know After 21st November 2025 By Krishna and Associates · March 2026 · ESI, Labour Law, Payroll Compliance The Code on Social Security, 2020 has come into force w.e.f. 21st November 2025, repealing the ESI Act, 1948 . With this, the definition of "wages" for ESI purposes has fundamentally changed — and so has ESI applicability for a large number of employers and employees across India. What Has Changed and Why It Matters Until 20th November 2025, ESI contributions were calculated on " Gross Wages " as defined under Section 2(22) of the ESI Act, 1948. The coverage threshold was ₹21,000 per month on gross salary. Employers routinely structured salary packages with a higher proportion of allowances — such as HRA, conveyance, and special allowances — to keep the gross figure below the ₹21,000 threshold or to reduce the ESI contribution base. With the implementation of the Code on So...