ESIC clarification regarding the implementation of Code on Social Security, 2020

The Employees’ State Insurance Corporation, through letter no. P-11012/4/2026-INSPECTION, dated 4^th June 2026, has provided clarification to the Telangana Labour Law Consultants Association regarding the calculation of wages under the Code on Social Security Code, 2020, for employee coverage.

The aforementioned letter references section 2(88) of the Code on Social Security, 2020, which defines the term “wages” and confirms that this definition has been in effect since 21^st November 2025, the date of implementation of the Code on Social Security, 2020. Additionally, the ESIC has clarified that the Central Rule of the Code on Social Security became effective on 8^th May 2026, thus making compliance with the new Rules mandatory.

In light of this notification, employers are advised to commence the coverage of their employees under the ESI Scheme based on the new definition of wages as outlined in the Code on Social Security, 2020 (refer to section 2(88) of the Code), for those who have yet to implement this compliance.

In contrast to the previous definition of wages, the new definition omits certain allowances that were included in the earlier wage definition under the erstwhile Employees’ State Insurance Act, 1948. As a result of this alteration in the wage definition, there will be an expanded coverage of employees under the ESI Scheme. Employees who were previously excluded from the ESI Scheme due to their monthly gross wages may now qualify for coverage under the ESI Scheme based on the new wage definition. It is crucial to emphasise that the mandatory ESI coverage wage ceiling remains fixed at ₹21,000 per month (₹25,000 for individuals with disabilities).