The short version
Section 31(1) of the Code on Social Security makes you liable for contributions for every employee, whether employed directly or through a contractor. You get recovery against the contractor. You do not get a defence.
The Rs 21,000 ESI wage ceiling lived in rule 50 of the ESI (Central) Rules 1950. Those Rules were expressly superseded on 8 May 2026 and no replacement ceiling has been notified for Chapter IV.
The Rs 25,000 ceiling for employees with disability is also gone, replaced by a three-year employer-share waiver with no wage figure attached.
The EPF ceiling is still Rs 15,000. It was affirmatively re-notified on 29 May 2026. The Rs 25,000 figure in the news is a proposal with no gazette notification.
The Employees' Enrolment Campaign closes on 31 October 2026 and, unlike the two schemes beside it, has no express extension power.
Yes. And if your contractor does not pay, the authority comes to you.
Section 31(1) of the Code on Social Security says the employer shall pay, in respect of every employee, whether directly employed by him or by or through a contractor, both the employer's contribution and the employee's contribution. Section 2(27) defines employer to expressly include a contractor.
You get a right of recovery against the contractor. You do not get a defence against the authority.
When ESI applies
Ten or more persons, under the First Schedule read with section 1(4), other than a seasonal factory.
The first proviso to the Chapter IV entry applies the Chapter to an establishment carrying on a hazardous or life-threatening occupation notified by the Central Government, even where a single employee is employed. Whether it reaches you depends on whether an occupation covering your activity has actually been notified, so check that before relying on it in either direction.
Below ten, coverage can be taken up voluntarily under section 1(7). Note that this is not a
unilateral employer election. The employer and a majority of the employees must have agreed, and the Director General then applies Chapter IV by notification.
The provision that catches people out
Section 1(8) provides that once a Chapter applies to an establishment, it continues to apply even if the number of employees later falls below the threshold. Dropping below ten does not end coverage.
Some of the confusion about ten versus twenty comes from the position under the old Act, where a number of States applied a twenty-employee threshold to shops and establishments before moving to ten. If that history matters to your position, check the notification for your State rather than relying on a general statement.
What is actually operating today
This needs care, because the direction of travel and the current position are different things.
The ESI Act 1948 was repealed outright on 21 November 2025. Section 164(2) then saved the old regime in two different ways, and the difference matters more than almost anything else in this article.
Section 164(2) saves the old regime in two ways, on two different clocks.
The ESI area-implementation notifications sit under (a), not (b). So the one-year date is a deadline for the subordinate detail, not a switch-off for area-based coverage.
If you operate in an area that was never brought under ESI, do not assume the Code has already changed that. Ask your regional ESIC office in writing and keep the reply. A written negative is worth having if a demand arrives later.
Meanwhile the Code's own ESI machinery is not fully switched on. The third proviso to the Chapter IV entry in the First Schedule provides that contributions become payable under section 29 on and from the date the Corporation actually provides Chapter IV benefits to the employees of that establishment, and that the date is to be notified by the Central Government.
Read that carefully. It is an establishment-level switch tied to benefits being available, not a single national start date, and it gives no relief where ESI benefits are already being provided to your workforce.
The Rs 21,000 ceiling has no current statutory source
This is the part most likely to surprise a payroll team, and it is the reason to read the rest carefully.
The Rs 21,000 monthly wage ceiling lived in rule 50 of the ESI (Central) Rules 1950. Those
Rules were expressly superseded on 8 May 2026 by the Social Security (Central) Rules 2026, notified as G.S.R. 344(E).
This was not an oversight. The ESI (Central) Rules 1950 are named as item (iii) in a list of twelve superseded instruments, and the notification invokes section 24 of the General Clauses Act 1897, which is the provision that keeps rules made under a repealed Act alive until rules under the re-enacting statute replace them. The Government used the mechanism designed to end that continuance.
Nothing replaced the figure. The 2026 Rules contain no wage ceiling rule at all.
Section 2(89) of the Code requires a wage ceiling to be notified for the purposes of Chapter III and Chapter IV. The only notification we have been able to trace is S.O. 2702(E) of 29 May 2026, and it is expressly confined to Chapter III, which is provident fund. We re-checked on 21 August 2026 and found no Chapter IV notification.
The Ministry's own drafting assumes the Chapter IV notification has not happened. A companion notification issued on 8 May 2026 refers to "the wage ceiling as may be notified by the Central Government under clause (89) of section 2 of the Code for the purposes of becoming a member under Chapter IV". Future conditional.
So why is everyone still applying Rs 21,000?
Two reasons. The Ministry's FAQs of 16 March 2026 say the existing ceiling continues, and Chapter IV contributions are not actually payable yet for the reason set out above. The FAQs have no binding force, and they predate the supersession by seven weeks.
Our position, stated plainly
Rs 21,000 is what is being applied in practice. The instrument that contained it has been superseded. No replacement has issued for Chapter IV. Treat it as an open point rather than settled law, and watch for a Chapter IV notification under section 2(89).
Anything done or omitted before 8 May 2026 is preserved by the express saving in the supersession clause, so for periods before that date rule 50 remains the reference.
The Rs 25,000 disability ceiling is gone
If your payroll configuration carries a Rs 25,000 ESI ceiling for employees with disability, that figure came from the second proviso to the same superseded rule 50. It appears nowhere in the 2026 Rules.
What replaced it is structurally different and carries no wage figure at all. Rule 19(2) provides that for an employee who is a person with disability under the Rights of Persons with Disabilities Act 2016 or the National Trust Act 1999, the employer is not required to pay the employer's share of contribution for up to three years from the date of commencement of the contribution period. Rule 19(3) provides that the Central Government reimburses that share to the Corporation.
A three-year employer-share waiver is not a higher wage ceiling. If your system treats it as one, it is wrong in both directions.
The rates
Rule 19(1) of the Social Security (Central) Rules 2026 sets the employer's contribution at three
and one-fourth per cent of wages and the employee's at three-fourth per cent, each rounded to the next higher rupee. The rule expresses these in words rather than numerals, which is worth knowing if you are quoting it. The rounding is per employee, not on the total.
Position as at 21 August 2026. Sources listed at the end of this article.
Provident fund
The EPF wage ceiling is Rs 15,000 a month, notified by S.O. 2702(E) dated 29 May 2026 under section 2(89) for the purposes of Chapter III. It has been Rs 15,000 since September 2014 and it was affirmatively re-notified three months ago.
The EPF Scheme 1952 was itself superseded, by the Employees' Provident Funds Scheme 2026, notified as G.S.R. 525(E) on 29 June 2026. The EDLI and pension schemes were replaced the same day.
The fifteen-day remittance deadline survives, now at paragraph 28(3) of the 2026 Scheme, which requires the employer to remit contributions and administrative charges electronically within fifteen days of the close of every month. Paragraph 24(2) puts the monthly ECR upload on the same clock.
Watch the paragraph numbering
Several summaries circulating online cite paragraph 6(1) for the fifteen-day timeline. That is the EDLI Scheme, not EPF. For EPF it is paragraph 28(3).
Paragraph 18(3) makes contributions subject to the wage ceiling notified by the Central Government, so the ceiling now flows from section 2(89) read with S.O. 2702(E) rather than from any paragraph of the scheme itself. Cite the pair, not the scheme alone.
On the Rs 25,000 EPF proposal
Checked on 21 August 2026. We could find no Cabinet decision and no gazette notification revising the EPF ceiling.
The file is moving, and one step of it is recent enough to be worth naming. On 4 August 2026 the Department of Expenditure cleared a proposal to raise the ceiling from Rs 15,000 to Rs
25,000. It now goes to the Union Cabinet.
That is a clearance, not a decision. Several headlines rendered it as "Govt approves proposal to raise EPF wage ceiling to Rs 25,000", which is why so many payroll teams believe the change has already happened. It has not been to Cabinet and no notification has issued.
Behind it sits a Supreme Court direction of January 2026 giving the Centre and EPFO four months to decide, in a public interest petition about the ceiling being frozen since 2014. EPFO had reportedly sought Rs 30,000. The effective dates circulating in the press could not be traced to any government source, so treat them as expectation.
No payroll change is warranted yet. When it happens it will arrive as a notification. Check the Gazette before acting on anything you read about Rs 25,000, including this.
The base changed even where the rate did not
ESI computes on wages as defined in section 2(88), which carries the fifty per cent deeming rule. The Ministry's FAQs of 16 March 2026 state that this applies from 21 November 2025. Those FAQs have no binding legal force, but they indicate how the Ministry reads its own provision.
In practice under the old regime, the coverage test was applied to gross wages. Whether it should still be applied to gross wages now that section 2(88) is in force has not been settled by notification or, so far as we can trace, by any court. Both readings are being taken.
That is not a comfortable position but it is the real one. Decide which reading you are applying, record the reasoning, and revisit it when the position firms up. An employer who has documented a considered view is in a very different position from one who simply carried the old practice forward.
Who is liable, precisely
The routes differ but the destination does not.
ESI
Section 31(1) puts the obligation on you directly, and section 31(6) gives you recovery against the contractor. Section 31(3) bars both employer and contractor from deducting the employer's share from wages.
Section 31(4) deems any sum you deduct from wages to have been entrusted to you by the employee for the purpose of paying that contribution. Entrustment is the language of trust rather than debt, which is why deducting and not remitting is treated as a different order of failure from paying late. Whether it amounts to criminal breach of trust on particular facts is for a court, but the framing is deliberate and deducted contributions should not be treated as working capital.
Provident fund
Section 17(1) is framed the other way. It is a recovery right over contributions and administrative charges paid or payable by an employer in respect of an employee employed by or through a contractor, and it assumes you are the one who has paid. Section 17(3) bars the contractor from deducting the employer share from wages. Section 19 makes EPF dues a charge on the assets
of the establishment, though priority operates in accordance with the Insolvency and Bankruptcy Code rather than absolutely.
Recovery is a right against the contractor. It is not a defence against the authority.
Where the contractor is not independently registered with EPFO, the practical position is that you compute, deduct and deposit both shares together with administrative charges. Section 17(1) expressly contemplates administrative charges as part of what a principal employer pays and can then recover. Paragraph 20 of the 2026 Scheme places that responsibility on the principal employer. We have not been able to confirm the current administrative charge rate from a primary source, so confirm it before building a monthly process around a figure.
What the courts have said
Royal Talkies, Hyderabad v. ESIC, (1978) 4 SCC 204 is the foundational case. Cinema owners were held to be principal employers for canteen and cycle stand workers engaged through independent contractors, the work being incidental to the establishment. Worth knowing that the appellants partly won: the determination was set aside for a fresh hearing on natural justice grounds.
BHEL v. ESI Corporation, (2008) 3 SCC 247 is often cited loosely. The Supreme Court said it failed to notice any significant difference in the purport and object of the ESI and EPF assessment provisions, setting aside a High Court view to the contrary. The appeal was allowed and the matter remitted, with the authority directed to implead or summon the contractors. BHEL won on procedure. The substantive liability was left intact, with the Court noting that the amount due had to be determined in respect of all contract workers engaged by the contractors.
Food Corporation of India v. PF Commissioner, (1990) 1 SCC 68, decided in October 1989, is frequently cited as authority on principal employer liability. It arose from a contract labour PF dispute at FCI depots but was decided on procedural grounds, on the Commissioner's duty to collect relevant evidence before determining the amount payable. It is not authority on substantive liability and should not be cited as though it were. It neither established nor negated liability.
One case we are deliberately not relying on
A 2026 Calcutta High Court decision quashing a recovery notice against a principal employer has been widely repeated. It traces to a single trade publication, the order itself is not available, and it does not appear in the usual law databases. We are not relying on it here and would suggest you do not either until the text is published.
What to collect from a contractor every month
A word first on the legal basis, because it is commonly overstated. Section 31(7) requires the contractor to maintain a register of employees as provided in the regulations and to submit it to you before settlement of any amount payable under section 31(6), which is the recovery process after you have already paid. It is not by itself a statutory right to withhold his invoice.
If you want the register before every payment, put it in the contract as a condition precedent to invoice release. The statute gives you the argument. The contract gives you the mechanism.
For provident fund
The ECR file as actually uploaded
The TRRN
The challan and bank payment confirmation, matched to that TRRN
The contractor's EPFO establishment code and coverage certificate, which determines which liability limb applies
UAN-wise contribution statements for the specific workers deployed to you
The wage register, reconciled to the ECR
The control that catches most problemsUploading an ECR generates a TRRN. It is not payment. Match the TRRN to the challan to the bank confirmation to the establishment code, every month.
Check contribution statements per worker rather than totals. A contractor deploying sixty people to you and paying for forty looks entirely fine at the summary level.
For ESI
Take the contribution return, the challan and receipt, the employer code, IP numbers and e-Pehchan status for each deployed worker, and contribution history per worker.
On due dates: EPF is fifteen days from the close of the month under paragraph 28(3) of the 2026 Scheme. The ESI fifteenth-of-the-month date comes from the ESI regulations saved by section 164(2)(b), not from the 2026 Rules, which set no remittance date at all.
That saving has a horizon. A 103-page draft of the ESI (General) Regulations 2026 was issued for comment on 10 August 2026 and remained in draft as at 21 August. When it is finalised, the remittance date is one of the things to re-check rather than assume.
One window worth using, and it closes in October
Three transition schemes sit in the annexure to the EPF Scheme 2026, notified on 29 June 2026.
Worth noting what makes the October date firm. VISHWAS and AMNESTY each contain an express power of extension. The Enrolment Campaign contains no equivalent provision, and EPFO's own language is that no further extension shall ordinarily be granted after that date. "Ordinarily" implies a residual discretion, so this is a firm date rather than an immovable one. Either way it is a better reason to act than the flat claim that the campaign is non-extendable, which nobody in government has actually made.
One thing to ignore if you come across it: a July 2026 headline reading "Employees Enrolment Campaign extended to Oct 31" is describing the campaign's own end date, not a subsequent extension of it.
Two cautions on the other two. VISHWAS only reaches default in payment of contribution for
the period before 14 June 2024, so an employer with a more recent default gets nothing from it. And AMNESTY 2026 is commonly described as a general amnesty for historical gaps. It is not. It relates to exempted establishments and provident fund trusts, principally trusts recognised under the Income Tax Act without a formal exemption notification. If you are a principal employer worried about contractor defaults, it is probably not for you.
Pre-November 2025 defaults remain fully recoverable under section 164(3) read with section 6 of the General Clauses Act. Repeal did not wipe the slate
Currency of this article
Law stated as at 21 August 2026. This area is moving quickly. Several positions above rest on instruments saved for a limited period, and the ESI wage ceiling question turns on a notification that has not yet issued. We review this article when a relevant notification is published and update the date above. Where we could not trace a figure to a primary source, the article says so rather than filling the gap.
Disclaimer
This article is general information about Indian labour law, not legal or tax advice, and no professional relationship arises from reading it. Applicability depends on your entity, workforce, states of operation and the terms of your contracts. Confirm your position with qualified payroll, tax and legal advisers before acting.
Sources
Statutes
Code on Social Security 2020, sections 1(4), 1(7), 1(8), 2(27), 2(88), 2(89), 17, 19, 29, 31, 164, and the First Schedule Chapter IV entry
General Clauses Act 1897, sections 6 and 24
Rules and schemesSocial Security (Central) Rules 2026, G.S.R. 344(E) dated 8 May 2026, supersession clause and rule 19
Employees' Provident Funds Scheme 2026, G.S.R. 525(E) dated 29 June 2026, paragraphs 18, 20, 24, 28 and the annexure containing the three transition schemes
EDLI Scheme 2026, G.S.R. 526(E), and Employees' Pension Scheme 2026, G.S.R. 527(E)
NotificationsS.O. 5319(E) dated 21 November 2025, commencing the Code on Social Security
S.O. 2702(E) dated 29 May 2026, notifying the Rs 15,000 wage ceiling for Chapter III
S.O. 2351(E) dated 8 May 2026, referring to a Chapter IV ceiling "as may be notified"
Ministry of Labour and Employment, Additional FAQs dated 16 March 2026
Case lawRoyal Talkies, Hyderabad v. ESIC, (1978) 4 SCC 204
BHEL v. ESI Corporation, (2008) 3 SCC 247
Food Corporation of India v. PF Commissioner, (1990) 1 SCC 68