Hello Everyone, Can anyone tell me if the Dearness allowance is part of the salary structure for private organizations or schools in Maharashtra? If yes and how is it calculated or at what percentage of Basic is the DA calculated?
From India, Mumbai
Labour Law & Hr Consultant
Ceo-usd Hr Solutions


Initially, determination of the salary structure of his employees lies with the individual employer. But in due course, it becomes a subject matter for collective bargaining between the individual employer and his employees depending on external factors like unionization, gradual hike in the wages of employees of similar industries in the region, rise in the cost of living which substantially affects the existing real wages, increase in the indirect financial commitments of the employer towards his employees due to statutory compliances like payment of statutory minimum wages, EPF, Gratuity etc., inevitably results in structuralization of wages into basic wages and other allowances in wage and salary administration. No private enterprise is an exception to this phenomenon and in fact private employers try their level best to reduce their indirect and long term financial commitments by apportioning a sizable chunk of the total salary or wages to allowances.

Among the allowances, dearness allowance is a unique one because of its capacity to absorb the inflationary trend and as such being treated as an essential and inclusive component for all employment benefits like EPF, gratuity, computation of parity between minimum wages and industry wages etc. Generally, D.A is linked to any one of the Cost of Living Indices keeping a particular year as a base year and then onwards it is periodically raised with the rise in the points of the CPI.

So far as I know, there is no law making D.A as a compulsory component of the salary structure. If an employment is an scheduled employment under the Minimum Wages Act,1948 and minimum wages are fixed by the appropriate Government under the Act, variable D.A would be an essential component of the minimum wages thus fixed. Thus, every employer whose industry falls within the purview of the MW Act,1948 would be naturally compelled to include V.D.A as a component of the wage structure of the employees to maintain parity between statutory minimum wages applicable and the industry wages payable.

When the Code on Wages,2019 comes into force, to comply with the definition of the term wages u/s 2(y) of the Code, every employer is forced to introduce the component of dearness allowance into the wage structure to maintain the proportionality of the included and excluded components for the purpose of the Code. Though, education is an industry, teachers are not treated as workmen for the purpose of labor laws other than gratuity and EPF.

From India, Salem

When the definition of wages under wage code and other code codes will be implemented, then DA will be one component of wages. But in the definition it has not been mentioned whether it will be variable DA ( VDA ) or fixed DA(FDA ).

Therefore, it will be possible to split one portion of Basic as DA (FDA ) to show as a part of wages. If it is variable DA , then there must be DA scheme mentioning Base year, initial index, review mode - monthly, Qtrly, half yearly, yearly, Neutralization method - per point basis, % method basis, Slab system basis etc.

In absence of all above, to my opinion it may be possible to keep only Basic ( considering as Basic + DA ) for fixation of Wages. In case of Minimum wages, it is variable DA as it is revised in most of the States in an interval of 6 months against one base year and increase/decrease of CPI.

S K Bandyopadhyay ( WB, Howrah)
CEO- USD HR Solutions
98310 81531

From India, New Delhi

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