Скачать или смотреть Is ESI eligibility now based on Basic + DA instead of Gross Salary

With the introduction of the Code on Wages, 2019 and the proposed implementation of the new labour codes, a common question has emerged: Is ESI eligibility now determined based on Basic + DA instead of Gross Salary?

Under the Employees’ State Insurance Act, 1948, ESI applicability has always been linked to “wages” and not strictly to Gross Salary. However, in practice, many employers assessed eligibility using gross monthly earnings, leading to confusion.

The Code on Wages, 2019 brings clarity by introducing a uniform definition of “wages”, under which:

Basic Pay + Dearness Allowance (DA) form the core component of wages

Other allowances are capped, such that wages must constitute at least 50% of total remuneration

As a result, ESI eligibility and contribution calculations are now aligned to “wages” as defined under the Code, which effectively means Basic + DA becomes the primary basis, subject to statutory exclusions and notified rules.

However, it is important to understand that:

The ESI wage ceiling of ₹21,000 per month continues, unless revised by notification

Allowances that qualify as “wages” under the Code may still be included for ESI purposes

Actual implementation depends on notification of the Code on Social Security and corresponding ESI rules