ESIC 2025 Wages Definition

The government of India has notified the New Labour Codes 2025 on Nov 21, 2025, which streamlines various definitions across the states. The new codes consolidate 29 laws into 4 codes. One of the major changes is the definition of "Wage". 

Soon, after that the Employees' State Insurance Corporation has issued a couple of circulars on Dec 10, 2025 and Dec 11, 2025 aligning with the New Labour Codes. The major change is the definition of Wage. Earlier the wage for the purpose of ESIC applicability and calculation was considered as "Gross Salary", has now been changed to "Basic (Basic + DA)".

• What does the ESIC circular say?
  In nutshell, the applicability and calculation will be based on "Wages" as defined under Section 2(88) of the Code on Social Security, 2020.
  • It would not be calculated on Gross Salary
  • It would be calculated on Basic + DA
  • The ceiling of 21,000 continues but on Basic and not on Gross Salary
• Wages?
  • Basic + DA
  • Cannot be less than 50% of gross
  • If less than 50% of the gross, it would be considered as 50% of gross
• Examples
  • CTC: INR 24,000 / month
    Basic:           10,000
    HRA:              5,000
    Allowances:   9,000
    Earlier, since the gross was more than INR 21,000, the ESIC was not applicable.
    
    However, now, since the wages will be higher of Basic or 50% of Gross:
    Basic:               10,000
    50% of Gross: 12,000
    So, the wage would be INR 12,000. Since it is less than INR 21,000, this would be included in ESIC.
  • CTC: INR 35,000 / month
    Basic:               15,000
    HRA:                  8,000
    Allowances:     12,000
    
    The wages will be higher of Basic or 50% of Gross:
    Basic: 15,000
    50% of Gross: 17,500
    So, the wage would be INR 17,500. Since it is less than INR 21,000, this would be included in ESIC.
    
    However, if you change the CTC structure to something like this, it would not be considered in ESIC.
    Basic:               25,000
    HRA:                  8,000
    Allowances:       2,000
    
• Overall impact of this notification would be:
  • Higher Costs for Employers as their contribution (3.25%) will increase
  • Take home salary may reduce as employee contribution (0.75%) will increase
  • More employees would fall under ESIC

P.S. This is just an advisory and interpretation of the circular to best of our knowledge. Do not consider this as a legal and compliance advice. Please connect with your legal and compliance advisor on the same.