Umakanthan53
Labour Law & Hr Consultant
Pan Singh Dangwal
Joint Manager
+1 Other

Dear Seniors
Our state govt has also notified the VDA alongwith the
Minimum wages. Pls clarify since VDA is notified by state govt whether it is legally mandatory
to put VDA component in salary structure or not?
Regds
Rachna
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Dear Rachana,

It is not statutorliy mandatory to have the component of VDA in the industry wage structure. However, what is important is that the sum total of the actual wages paid to an employee/workman holding a particular post/ designated job in a scheduled employment coming under the Minimum Wages Act,1948 should not be less than the sum total of the minimum wages fixed under the Act. As per the Minimum Wages Act,1948 the minimum wages once fixed should be periodically revised not exceeding a period of five years. You are well aware that within a span of five years, the hike in price level will have a negative impact on the value of money and this important factor has to be taken into account by the Appropriate Govt while fixing and revising the rates of minimum wages because of the predominantly unorganised nature of employment prevailing in the scheduled employments. That's why the component of VDA is introduced by linking it to the Cost of Living Index.If you don't have the component of VDA in your industry wage structure, it is your statutory obligation to ensure that the sum total of your industry wages remain always equal to the sum total of the minimum wages fixed by the Govt.
Some more important views on the subject matter in continuation. The terms " wages"and "salary" have been defined under various Labour Enactments differently depending on the over-all objective of each Legislation. The definitions include certain components as part of the "wages" they mean and leave out other components of the wage structure for the purpose of the computation of the benefits they intend to confer on the employees covered by them. One can not help it because wage or salary is the monetary consideration as well as the part of other considerations computable in terms of money for the services rendered by the employee and from times immemorial it is a product of demand and supply only. Hence also the variation arisiing out of inclusion and exclusion of certain components and the practice of segregation of the entire remuneration into basic wages or basic pay or basic salary and allowances and allowances are always related to the nature as well as duration of the employment.

Therefore, while juxta-posing industry wages and minimum wages, the employer has to be more cautious about the followung aspects:

(a) To arrive at the parity of the sum total of the industry wages and the minimum wages, only those components included in the definition of wages u/s 2(h) of the Minimum Wages Act,1948 should be taken into account for inclusion.

(b) Even then, such inclusion should not result in deprivation of the quantum of any social security benefits like gratuity, EPFetc.
Dear sir
Since DA is not the statutory component hence employer may take it as advantage to let the minimize EPF & Bonus contributions. Frankly speaking it is the deprivation toward the employee benefits?
Your Views please....
Dear Rachna,
Dearness Allowance is included in salary or wages under the PB Act,1965 and it is also taken into a/c to compute the lastdrawn wages under the PG Act,1972 for the purpose of gratuity. Sec.6 of the EPF Act,1952 includes D.A and Retaining Allowance too in the percentage of the contribution to the EPF.
Dear Rachna,
Though Umakanth sir has explained the wages concept in various aspects in relation to concerned Act/s.
Even rightly interpretated by you, DA is considered as part of Wage/Salary under PF and Bonus Act. You have not mentioned the state name. In some states the DA is compulsory part of the Minimum Wages Structure under the Minimum Wages Act, while is some state its on employer discretion whether to include DA or not.
If in your case DA is not a compulsory part, than I would also suggest not to include this under Salary structure. You can include other heads (HRA, Conveyance, Uniform Allowance, Special Allowance etc.). This will minimize cost towards Bonus & EPF. Since many companies are now focussing for cost optimization. You can opt for the same.
Fellow members can put more light on the matter.
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