ESIC From 1 October: Contribution Periods, the ₹21,000 Ceiling and Employees Who Got a Raise
ESI covers employees earning up to ₹21,000 a month, with contributions of 3.25% by the employer and 0.75% by the employee. Coverage is fixed for six-month periods, April to September and October to March. An employee whose pay crossed ₹21,000 mid-period contributes until the period ends and leaves ESI from 1 October.
Every October, payroll teams have the same question: an employee got a raise in July and now earns more than ₹21,000. Should ESI have stopped? Should it stop now? The answer is in the contribution period. To check the amounts, use the ESI contribution calculator.
The basics
| Item | Rule |
|---|---|
| Wage ceiling for coverage | ₹21,000 a month (₹25,000 for persons with disability) |
| Employer contribution | 3.25% of wages |
| Employee contribution | 0.75% of wages |
| Contribution periods | 1 April to 30 September, and 1 October to 31 March |
| Payment due | By the 15th of the following month |
The ceiling has not changed since 2017. A revision has been discussed, but no notification had been issued by October 2026.
The mid-period rule
Coverage is decided at the start of each contribution period. If an employee's wages go above ₹21,000 during the period, contributions continue until the period ends, on the full wages.
So an employee whose pay rose from ₹19,500 to ₹22,500 in July 2026:
- ✓contributes to ESI on ₹22,500 for July, August and September;
- ✓stops being covered from 1 October 2026, the start of the new period, because wages are now above the ceiling.
Wages under the labour codes
Since the Code on Social Security came into force, ESI wages follow the Code's definition: basic, DA and retaining allowance, with allowances above 50% of total pay added back. For employees with low basic pay, this can bring more pay into ESI wages, and can also push some above the ceiling.
An October checklist
- List employees whose ESI wages exceeded ₹21,000 in September. They exit ESI from October's wages.
- List new employees and those whose wages fell to ₹21,000 or below. They are covered from October.
- Recalculate ESI wages under the Code's definition, not on gross pay or basic alone.
- Update your HRMS, so the next period's coverage is applied automatically.
- Tell exiting employees that their ESI benefits continue for a time after contributions stop, under the scheme's benefit periods, and arrange health insurance if your policy offers it.
Frequently asked questions
Does overtime count for the ceiling?
Overtime is not counted when deciding coverage, but it is included in wages for calculating contributions once an employee is covered.
Do low-paid employees pay the employee share?
Employees whose average daily wage is up to ₹176 are exempt from the employee share. The employer still pays its share.
Is ESI available in every district?
Coverage has been extended across the country under the Code, though some state-level steps were still rolling out in 2026.
Sources
- ✓ESI compliance in India: applicability and contribution rates, Treelife
- ✓ESIC wage ceiling change: what it would mean for employers, Bhatt & Joshi Associates
- ✓ESIC benefits reach a wider workforce under the labour codes, Outlook Money
This is a summary, not legal advice. Confirm current rules on the ESIC portal.
Written by
HR Manager, Airwix Technologies (Sleet)
Nihit Dobariya is the HR Manager at Airwix Technologies in Ahmedabad, where he runs HR and payroll for the team behind Sleet. He writes about payroll, PF and ESIC, professional tax, the labour codes and everyday HR practice for Indian employers, and checks each rule against the official notification before it is published.
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