If the wage of an employee (excluding remuneration for overtime work) exceeds the wage limit prescribed by the Central Government after April or October for the respective contribution periods, then the employee continues to be an employee till the end of that contribution period. Hence, the contribution is to be deducted and paid on the total wages earned.
For example, let us consider that an employee was getting a salary of Rs. 20,000 in July, 2016. As per the old limit, this employee was not being covered by the ESI Scheme. But as per this revision, with effective from October, 2016, the employee will be covered under the ESI Scheme. Next, let us assume that the employee’s salary is revised in the month of November. Based on the revised salary, the employee will be getting Rs. 23,000. This revised salary is above the limit of Rs. 21,000 and hence this employee should cease to fall within the limit. But as per the ESI Scheme, even after the revised salary, this employee will continue to fall within the limit of Rs. 21,000, till the end of the contribution period , that is 31st March. Hence, the contribution is to be deducted and paid on the total wages earned, that is Rs. 23,000.