KK!HR
Management Consultancy
Srinath Sai Ram
Hr Manager
+1 Other

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How to calculate DA for Private Employees As per Consumer Price Index ?
Please help .
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During the pay revision for government employees and PSU employees, the existing DA is merged in the basic pay and the DA on the start date of pay revision is treated as zero. So the Consumer Price Index (CPI) on the date of revision is taken as nil point. Thereafter, for every 1% increase in CPI point on that date the DA will increase by 1% of basic pay. For instance let us assume the CPI as on 01.12.17 to be 100 and for every 10 point increase in CPI, the DA of the employees will enhance by 1% of the basic pay. Here you can opt for a simple solution by keeping the existing DA as fixed and for every 1% increase in CPI allow variable DA of 1% increase in basic pay and in proportion thereof. The rate of neutralisation could also vary, in Govt. sector it is 100% (i.e., 1% each) but it varies in other sectors. You can choose a convenient formula depending on your capacity to pay. In case you have any specific query you may reply so.
Dear colleague,
In the first place ,tell us what is compulsion to introduce DA in your organ? companies in private sector having double link age ie both to basic salary slabs and CPI have been experiencing disproportionate growth in DA component and distortion in the wage structure. If you have no compulsion , don't think of
having it.
Regards
Vinayak Nagarkar
HR-Consultant
Dear Fernand, are you planning to give Fixed DA ? in addition to Minimum Wages which comprises of Basic Salary+VDA
Dear Friend,
Your query on DA for private employee is not understood. Still there are organisations those are following VDA component for counter price rise, where DA is given. However if you want to go for increment in wages to commensurate with price rise. You need to follow or monitor the CPI everymonth and see the % variation happens. Simply calculate the mean% between the price index and fix a price per point increase or decrease. On that basis you can make addition, if it is increased.
Dear colleague,
I want share a general concern which I have observed earlier and now also that the querist do not provide essential/relevant information on the query which results into giving views on assumptios and sometimes can be misleading.
As regards the question regarding DA , whether it is academic or arising out of some practical issue has not been stated. Besides it would help if info is given on which industry, whether manufacturing or commercial, whether unionised and such other so that members can give value-added response.
I have already stated that DA component for unionised workers and staff in many well established concerns have risen uncontrollbly high distorting the wage structure and creating anamolies like worker getting more salary than Supervisors and also reducing the salary differentials to unfair levels.
The above notwithstanding, if there is compulsion ( union demand) to introduce DA, following may be kept in mind:
1.DA is paid to protect basic wages(purchasing power) against the price rise of essential commodities . DA was introduced for the first during second world war and for good reasons but over a period due to union demands/pressure it has unprecedented growth and all the principles of DA fixation in organised sector were thrown to winds by adopting veriety of formula during each successive wage abreementsfor buying peace
2.In designing Fresh DA formula, one faces lot of controversies and widely differing views right from selection of CPI series, base rate of of neutralisation and variable DA rate, whether to link it only to CPI or also to different slabs of basic salary and ceiling on DA etc. on which consensus becomes difficult,
Particularly when you are negotiating with the union.
3. By very concept DA is to protect basic wages from erosion due to price rise, it cannot be linked to productivity gains and only leads to automatic rise in wage cost.
4.Therefore, if possible have consolidated salary scales( meaning salary is inclusive of DA).and other allowances as per industry cum region basis.
Regards
Vinayak Nagarkar
HR- Consultant
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