Pls.clarify whether the salary you have mentioned is gross salary or CTC.
Considering that Rs 16000 is the gross salary for ESIC purposes from the month of Sep, please note that ESIC contibutions needs to be paid till Sep month as there is no provision for discontinuation of ESIC contributions in the middle of a contribution period even though there is a increase in the salary.
You need to show your exit from the ESIC during the submission of return. There is no requirement to pay the contributions from Oct onwards.
As per ESI act, contributions are divided in 2 i.e Apr- Sep and Oct-Mar in a financial year.
ESI deduction for any employee deducted either in the Month of Apr or oct they will have to continue till the period completes ie upto Sep or Mar. And please note that no one gets refund if by mistake the contributions have made.
In your case ESI contribution for the month of Sep also needs to be paid.
The rates of contribution, as a percentage of gross wages payable to the employees, is explained in the table below
Percentage of Gross Pay Example Gross Salary Contributions
Employee Deduction 0.75% Rs 15,000 15,000 * 0.75% = 112.50
Employer Contribution 3.25% 15,000 * 3.25% = 487.50
Total Contributions for this employee 112.50 + 487.50 = Rs 600.00
In case, the gross salary of the employee exceeds Rs. 21,000 during the contribution period (explained next), the ESI contributions would be calculated on the new salary and not Rs 21,000.
For example, if the salary of an employee increases to Rs. 22,000 per month, then the ESI would be calculated on Rs. 22,000 instead of Rs. 21,000 during the contribution period.
Contribution Period and Benefit Period
Payroll administrators often face confusion when employees salaries change – especially when the monthly salary exceeds the ESI limits of Rs 21,000.
To handle this situation, ESI has a concept of contribution periods during which the ESI contributions have to continue, even when the salary exceeds the maximum limits.
There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration.
Contribution Period Cash Benefit Period
1st April to 30th September 1st January of the following year to 30th June
1st October to 31st March of the following year 1st July to 31st December
After the commencement of a contribution period, even if the gross salary of an employee exceeds Rs. 21,000 monthly, the employee continues to be covered under ESI scheme till the end of that contribution period.
The contribution is deducted on the new salary. Let us look at an example to understand this better.
If an employee’s gross salary increases in June from Rs. 18,000 (within ESI limit) to Rs. 22,000 (above ESI limit), the deductions for ESI will continue to happen till the end of the ESI contribution period i.e. September.
And the deduction amount for both the employee and employer will be calculated on the increased gross salary of Rs. 22,000.
At the end of the contribution period, if the employee salary is more than the ESI limit, no further deductions and contributions are required. The employee will still be covered under ESI till 30th June of the following year.
Similar rules apply when an employee's salary increases in the 2nd contribution period.