Reshma Chakraborty Started The Discussion:
I want to calculate Variable Dearness Allowance as it is important component of salary for our field staff
Can you please guide me the method of calculating the same
Also Do I need to register my company for getting latest Consumer Index points.
If yes where should I register
I need to update the VDA every quarter
Please throw some light as to how should I proceed.
Kindly click on the following link, it will give you some required information,
Pls let me know was this information useful,,
If not let me try out more & give information,,,,
In CiteHR you will get A to Z information on HRů..
M.Peer Mohamed Sardhar
MINIMUM WAGES ACT, 1948
A tripartite Committee Viz.,"The Committee on Fair Wage" was set up in 1948 to provide guidelines for wage structures in the country. The report of this Committee was a major landmark in the history of formulation of wage policy in India. Its recommendations set out the key concepts of the `living wage', "minimum wages" and "fair wage" besides setting out guidelines for wage fixation.
Article 39 states that the State shall, in particular, direct its policy towards
securing (a) that the citizen, men and women equally shall have the right to an adequate livelihood and (b) that there is equal pay for equal work for both men and women.
Article 43 states that the State shall endeavour, by suitable legislation or
economic organisation or in any other way, to give all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure, and social and cultural opportunities.
Enactment of the Minimum Wages Act
* The initiative started with the resolution placed by one Shri K.G.R.Choudhary in 1920 for setting up Boards for determination of minimum wages in each industry.
* The International Labour Conference adopted in 1928 Convention No.26 and Recommendation No. 30 relating to wage fixing machinery in trades or parts of trades.
* On the recommendation of the Standing Labour Committee and Indian Labour Conference, a Labour Investigation Committee was appointed in 1943 to investigate into the question of wages and other matters like housing, social conditions and employment.
* A draft bill was considered by the Indian Labour Conference in 1945.
* The 8th meeting of the Standing Labour Committee recommended in 1946 to enact a separate legislation for the unorganised sector including working hours, minimum wages and paid holidays.
* A Minimum Wages Bill was introduced in the Central Legislative Assembly on 11.4.46 to provide for fixation of minimum wages in certain employments. It was passed in 1946 and came into force with effect from 15.3.48.
Under the Act, Central and State Governments are appropriate Governments to
(a) notify scheduled employment
(b) fix/revise minimum wages
The Act contains list of all these employments for which minimum wages are to be fixed by the appropriate Governments.
There are two parts of the Schedule. Part I has non-agricultural employments
whereas Part-II relates to employment in agriculture.
Criteria for notification of scheduled employment
The appropriate Government fixes the minimum wage in respect of only those scheduled employments where the number of employees is 1000 or more.
Fixation/revision of minimum wages
The norms include those which were recommended by the Indian Labour
Conference in its session held in 1957.
(i) 3 consumption units for one earner.
(ii) Minimum food requirements of 2700 calories per average Indian adult.
(iii) Clothing requirements of 72 yards per annum per family.
(iv) Rent corresponding to the minimum area provided for under Government's Industrial Housing Scheme.
(v) Fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total Minimum Wages.
(i) "Children education, medical requirement, minimum recreation including festivals/ceremonies and provision for old age, marriage etc. should further constitute 25% of the total minimum wage." This judgment was delivered by the Supreme Court of India in 1991 in the case of Reptakos Brett and Co.Vs.its workmen.
(ii) Local conditions and other factors influencing the wage rate.
Methods for fixation/revision of minimum wages
Section 3 empowers appropriate Government to fix the minimum rates of wages in the scheduled employments.
Revise the Minimum rates at an appropriate interval not exceeding five years.
Procedure for Fixation/Revision
In Section 5 of the Minimum Wages Act, 1948, two methods have been provided for fixation/revision of minimum wages. They are Committee method and Notification method.
Under this method, committees and sub-committees are set up by the
appropriate Governments to hold enquiries and make recommendations with regard to fixation and revision of minimum wages, as the case may be.
In this method, Government proposals are published in the Official Gazette for information of the persons likely to be affected thereby and specify a date not less than two months from the date of the notification on which the proposals will be taken into consideration.
After considering advice of the Committees/Sub-committees and all the
representations received by the specified date in Notification method, the
appropriate Government shall, by notification in the Official Gazette, fix/revise the minimum wage in respect of the concerned scheduled employment and it shall come into force on expiry of three months from the date of its issue.
Variable Dearness Allowance (VDA)
It was recommended in the Labour Ministers' Conference held in 1988, to evolve a mechanism to protect wages against inflation by linking it to rise in the Consumer Price Index. The Variable Dearness Allowance came into being in the year 1991. The allowance is revised twice a year, once on 1st April and then on 1st October. In the State Sphere, 26 States/Union Territories have provisions for Variable Dearness Allowance, at present.
The enforcement of the provisions of the Minimum Wages Act in the Central Sphere is secured through the officers of Central Industrial Relations Machinery.
In so far as State Sphere is concerned, the enforcement is the responsibility of the respective State Government/Union Territory.
Hence it started with the good intentions to provide for a decent wages for workers. Field staff who come in the Management Cadre usually left out as they are comparatively well remunerated.
However as an functional head you must analyse whether it is relevant to your organization and remember one thing - it is based on CPI 1991 series which is updated every month and usually doesn't go down and has the potential to be a risk when it comes to maintaining the costs within the Budgets!. In my analysis i found that it had increased by 92 % in a span of four years..therefore am in the process of converting the same in Fixed D.A. which would be a herculean task!
Here the difference between the two reading is taken for calculation for instance with the hypothetical example as below:
Sep'07 - 13200 points
Oct'07 - 13400 points
The difference 200 points in multiplied by the factor as decided between the parties ( company and Union) to pay 2.5 per ten points hence it would be 200*2.5/10 = Rs 50 per day. If the person has worked for 26 days - he would be paid VDA of Rs 50 * 26 = 1300 in the wages for Oct'07.
Hope that clarifies some issues.
Considering the living cost and all, Wage Revision is being done once in five years or ten years. But inflation will go up day by day and subsequently the money value will come down. To compensate this we have to wait till the next Wage Revision, which is not practical. That is why the DA is introduced.
The devaluation of money can be assessed through Whole Sale Price Index, All India Cosumer Price Index etc. The difference between these two is that, price variation of all commodities are taken into account for Whole Sale Price Index. But the All India Consumer Price Index is based on a particular cosumer viz. Industial Worker and that even, on some specified commodiies & services called "Basket of goods".
Based on All India Consumer Price, Industrial DA being paid; variable in quarters commencing from January, April, July & October. I.e. for January the AICPI will be the average of previous September, October & November. Similarly for April it will be December, January & February, for July it will be March, April & May and for October it will be June, July & August respectively.
When the money devaluation is fully compensated it is called as full DA neutralisation. The formula for full DA neutralisation = (Total points - Base points)/ Base points (in percentage). The AICPI is introduced in India in 1960 and revised in 1982 & 2001. AICPI of 2001 x 4.63, we get AICPI of 1982 and AICPI of 1982 x 4.93, we get AICPI of 1960. For DA calculation AICPI of 1960 is accepted as the base.
Now in India mainly two term's wage settlements are in exist; Wage Settlements of 1.1.1997 & 1.1.2007. The base point in 1.1.1997 is 1708 & in 1.1.2007 is 2884.
I shall quote one example,i.e. calculation of AICPI for July '10. This is equalent to average of previous March, April & May; which recorded as 170, 170 & 172 (Base year 2001). Multiply with 4.63 and round, we get 787,787 & 796 (Base year 1982). Multiply with 4.93 and round, we get 3880,3880 & 3924 (Base year 1960). Find average of these 3 and round, we get 3895.
DA for 1.1.97 scale. Total points - 3895, Base points - 1708, Total - Base = 2187. % is 2187/1708 x 100 = 128.0 ( Correct to one decimal).
DA for 1.1.2007 scale. Total points - 3895, Base points - 2884, Total - Base = 1011. % is 1011/2884 x 100 = 35.1 (Correct to one decimal).
I shall insert Excel sheet for IDA calculation w.e.f 1.10.2008. You may extent the rows further (as necessary) and just enter the 3 indexes towards the year 2001 in green colour column. The results will appear in yellow colour and red colour is used for static informations.
ITI Employees' Association,
ITI Limited, PALAKKAD - 678 623,
+91 9447 467 667
AICPI (base 2001) can be had from the following site.
Labour Statistics Page 2
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