ESIC Applicability Changes Under New Labour Code 2025

TechFlow employed 12 people:

• 10 software engineers earning ₹45,000-₹75,000 monthly (above ₹21,000 ESI threshold)
• 1 office manager earning ₹18,000 monthly (below threshold)
• 1 driver earning ₹12,000 monthly (below threshold)

Under old rules, TechFlow calculated:
"Only 2 employees below ₹21,000 threshold, so ESIC doesn't apply."

The new code clarified that ESIC applies if:

• You have 10+ total employees in a notified area (Mumbai is notified), AND
• Any employee earns ≤₹21,000 monthly

TechFlow had 12 employees (exceeds 10) AND had 2 employees below ₹21,000 threshold.
Applicability: ESIC mandatory for the 2 eligible employees.

• Assumed ESIC applies only if majority of employees fall under threshold
• Didn't understand applicability is based on "10+ employees" AND "any employee ≤₹21,000"
• Didn't register for 2 years, accumulating liability

FabricPro employed:

• 35 direct permanent workers
• 40 contract workers supplied through a labor contractor
• Total workforce: 75 employees

Management Position: "Our payroll has 35 employees. The contractor manages 40 workers. ESIC applies only to our direct employees."

The new code eliminated the distinction between direct and contract workers for ESIC applicability. The critical test became: "Does the principal employer have effective control over the work?"
If yes, contract workers count toward ESIC applicability threshold.

Applicability for FabricPro:

• Total workforce (direct + contract): 75 employees
• Many contract workers earned ≤₹21,000 monthly
• ESIC mandatory for all eligible workers (both direct and contract)

• Assumed contractor workers didn't count toward their ESIC obligation
• Registered ESIC for 35 direct employees only
• Didn't ensure contractor enrolled 40 workers in ESIC
• Thought principal employer responsibility ended at contractor payment

StyleMax managed 8 stores in different areas:

• Each store employed 8-10 people
• Total workforce: 72 employees

Management assumption: "Each store individually has <10 employees, so no ESIC."

ESIC applicability is determined on an establishment-wise basis. The question became: "Is this one establishment (centralized company) or eight separate establishments?"

For StyleMax:

• Single legal entity
• Centralized management and payroll system
• Unified HR policies
• Shared inventory and financial systems

Applicability: Treated as a single establishment with 72 employees. ESIC mandatory.

• Treated each store as separate entity for ESIC purposes
• Didn't register any store under ESIC
• Operated for 3 years without ESIC coverage
• Multiple employees denied medical benefits

CodeFlow employed:

• 95 software engineers earning ₹50,000-₹1,20,000 monthly (above ESI threshold)
• 5 housekeeping staff earning ₹12,000-₹15,000 monthly (below threshold)
• 3 security guards earning ₹14,000-₹16,000 monthly (below threshold)
• 2 drivers earning ₹13,000-₹14,000 monthly (below threshold)
• Total: 105 employees

Management Assumption: "Only 10 employees below ₹21,000, and they're support staff. ESIC probably doesn't apply to IT company."

ESIC applies regardless of industry type. "IT company" doesn't exempt anyone. All employees earning ≤₹21,000 must be covered.

Applicability: All 10 support staff must be covered under ESIC.

• Assumed IT industry exemption (no such exemption exists)
• Didn't register support staff in ESIC
• Thought support staff weren't "core" employees
• Misunderstood ESIC as applying only to manufacturing/factory workers

SkyView had:

• 80 permanent staff (earning ₹15,000-₹25,000 monthly)
• 60 seasonal workers during peak season (earning ₹12,000 monthly, employed only 4-5 months yearly)

Management Position: "Seasonal workers are temporary. ESIC applies only to permanent staff. We register 80 permanent employees."

The new code extended ESIC to cover seasonal and temporary workers. If they work for a threshold establishment, they're covered during employment period.

Applicability:

• Peak season (80 permanent + 60 seasonal = 140): All 140 must be covered under ESIC
• Off-season (80 permanent): Only these covered
• Seasonal workers must be individually enrolled when they join

• Excluded seasonal workers from ESIC entirely
• Didn't adjust enrollment during peak season
• Didn't understand seasonal workers have same ESI rights as permanent

FastDeliver operated with:

• 500 independent delivery partners (not employees, treated as contractors)
• No employment contracts
• Payment per delivery (no regular salary)
• No statutory benefits provided

Management Position: "These are independent contractors, not employees. ESIC and labour laws don't apply."

The Code on Social Security, 2020 specifically extended coverage to gig and platform workers, creating new ESIC applicability categories.

New Requirements for Platform Employers:

• Register the platform as ESIC establishment
• Enroll gig workers separately (based on earnings)
• Contribute to welfare scheme (details still being clarified)
• Maintain platform worker records

Applicability: FastDeliver must register and contribute to social security for platform workers earning below threshold.

• Assumed gig workers were exempt from all labour laws
• Didn't understand new code coverage extension
• Didn't register platform as ESIC establishment
• Provided no statutory benefits

CustomerCare employed 50 people with salary structure:

• Basic Pay: ₹8,000 (16%)
• HRA: ₹7,000 (14%)
• Conveyance: ₹5,000 (10%)
• Special Allowance: ₹30,000 (60%)
• Gross: ₹50,000

ESIC calculated on gross salary (₹50,000), placing all employees above ₹21,000 threshold.

New wage definition requires basic salary minimum 50% of gross. CustomerCare's structure became non-compliant.

Required Restructuring:

• Basic Pay: ₹25,000 (50%)
• HRA: ₹8,000
• Conveyance: ₹7,000
• Special Allowance: ₹10,000
• Gross: ₹50,000 (unchanged)

Gross salary remains ₹50,000, still above ₹21,000. BUT the wage restructuring affected PF calculations and some employees' perception of take-home.

What Happened: During restructuring, CustomerCare discovered that 8 employees actually fell below ₹21,000 gross after accurate wage restructuring. These employees suddenly required ESIC coverage.