After the start of a contribution period, if an employee's gross monthly salary exceeds Rs. 21,000, the employee will still be covered under the ESI scheme until the end of that contribution period. The contribution for ESI is deducted from the new salary. To illustrate this, let's consider an example.
Suppose an employee's gross salary increases from Rs. 18,000 (within the ESI limit) to Rs. 22,000 (above the ESI limit) in June. The deductions for ESI will continue to be made until the end of the ESI contribution period, which is September. Both the employee and the employer will calculate their deductions based on the increased gross salary of Rs. 22,000.
Once the contribution period ends, if the employee's salary exceeds the ESI limit, no further deductions or contributions are required. However, the employee will still remain covered under the ESI scheme until the 30th of June the following year.
Similar rules apply when an employee's salary increases in the second contribution period. If the gross salary during the contribution period exceeds Rs. 21,000, the ESI contributions will be calculated based on the new salary, not Rs. 21,000. For instance, if an employee's salary increases to Rs. 22,000 per month, the ESI calculations will be based on Rs. 22,000 during the contribution period.
The comparison of income is made with the full income, and the ESI calculation is done based on the actual payout (income).
Employees who earn a daily average wage up to Rs. 176 are exempted from ESIC contributions. However, employers are still required to contribute their share for these employees.
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