Understanding COLA: How Do You Calculate and Include It in Salary Structures?

Dear Seniors,

Could anyone explain to me how COLA (Cost of Living Adjustment) component can be calculated and included in a salary structure?

Regards,
Mahesh

For each scheduled employment, Variable Dearness Allowance has been declared by the state government following the provisions of the Minimum Wages Act. The VDA is linked to the Cost of Living Index number. The VDA will be the same for all employees under one industry/scheduled employment. It may be like Rs 1.60 per month for every point of CPI (Consumer Price Index) above, say, 400 points. If the present CPI is 1567, then the VDA will be Rs 1.6 multiplied by 1167 (1567-400).

For a clear understanding, it is necessary to know the employment in which your establishment falls. Please verify the present CPI and find what is stated in the Minimum Wages notification concerning your organization.

Regards,

Madhu.T.K