ESIC Registration Applicability: The Two Numbers I'd Keep Apart

The contribution-period rule for wage changes

ESI does not reassess coverage the moment a salary crosses ₹21,000. The scheme runs on two fixed contribution periods a year: April to September, and October to March. An employee who crosses the wage ceiling partway through a contribution period remains covered, and contributions continue, until that period ends. Coverage is reassessed only at the boundary between periods, based on the wage applicable then. This regularly surprises payroll teams who expect coverage to stop in the exact month a raise takes someone over the ceiling.

An input dealer with 12 staff, tested both ways

Say a seed, fertiliser and pesticide dealer in a market town employs 12 people across the counter, the godown and deliveries. Because the Code on Social Security 2020 applies ESI to every establishment employing 10 or more people, this 12-person establishment is covered and must register. Before 21 November 2025 the answer depended on whether the dealer's state had notified shops and establishments at 10 employees or at 20; that state-by-state check no longer decides it.

Once registered, only the employees among the 12 who earn ₹21,000 a month or less in wages are individually covered and contribute. If the counter and godown staff earn ₹18,000 and the senior salesperson earns ₹28,000, the salesperson is not personally covered by ESI despite working at a covered establishment. The retail shop checklist covers the rest of what a counter like this needs.

Two columns I'd keep in payroll

The mistake I would design the payroll sheet against is mixing the two tests. So I would keep them as two separate columns in the payroll sheet:

• The establishment column: a monthly headcount of everyone employed, however they are paid. It answers one question: have we reached 10? At 10, the establishment registers.
• The employee column: each person's wages as the Code defines them (basic pay, dearness allowance, retaining allowance, plus the add-back if excluded items exceed half of pay), checked against ₹21,000, or ₹25,000 for an employee with a disability.

Then two dates a year matter: the start of April and the start of October, when coverage is reassessed for anyone whose wages crossed the ceiling during the previous period. Two columns, two questions, checked at two dates a year. The same sheet can carry the EPFO count, which works on a different number (20) and a different rule.

Four payroll mistakes with ESIC

• Assuming establishment registration means every employee is covered. The wage ceiling is a separate, employee-level filter applied after the establishment registers.
• Applying an old state-notified threshold of 20 to non-factory establishments. Since 21 November 2025, factories and other establishments are both covered at 10 employees under the Code on Social Security, whatever an earlier state notification said.
• Removing an employee from ESI in the exact month their salary crosses ₹21,000. Coverage continues until the end of the current contribution period (April-September or October-March), not the pay cycle of the raise.
• Not re-checking coverage after the labour codes took effect. States had lowered thresholds for shops and establishments at different times, and the Code now sets 10 for all, so a threshold you confirmed a few years ago may no longer be current law.

Checking both tests

• Confirm whether your establishment employs 10 or more people: the ESIC threshold for factories, shops and other establishments alike under the Code on Social Security 2020.
• If your establishment meets it, register with ESIC even if not every employee will individually qualify for coverage.
• Track each employee's wages (as defined in the Code on Social Security) against the ₹21,000 (₹25,000 for employees with disabilities) ceiling to decide individual coverage.
• Build the contribution-period rule (April-September, October-March) into payroll, so contributions do not stop mid-period when an employee's wages cross the ceiling.