Daily Allowance - Manufacturing Company

Hi,
I am working in a chemical manufacturing company and designing Travel policies. There are certain questions that are coming to my mind...Request, if someone can solve the same-
1. Is it necessary to pay Daliy Allowance to the employee???
2. If Yes, then on what basis should we define the same and what should be the maximum limit??
3. If the employee is geeting free fooding and lodging i.e. the employee is staying in the guest house and having food in the office premises, is it necessary to pay Daily Allowance to the employee? why even some part like 50% or so??
Waiting for the reply.
Rgds
Supriya

What is meant by Daily Allowance? Is it a part of salary which is paid only on the days of attendance? If so, it is not mandatory as per any statute. However, if you mean DEARNESS ALLOWANCE or simply DA, it has a different position in law. It is a part of salary fixed as per Minimum Wages Act.
According to Minimum Wages Act an employee is required to be paid a minimum wages and that wages should reflect the cost of living of the place where the worker is engaged. Accordingly, the wages will vary every month or bi month depending upon the cost of living index. The component of the salary which varies according to cost of living is called Dearness Allowance or Variable DA.
Free food, housing and other facilities are simply benefits offered to employees and they will not form part of salary and hence can not be clubbed together. However, the employer can fix a high salary and deduct costs of these facilities from it and pay the net amount.
Regards,
Madhu.T.K

Dear Madhu,
Thanks for your reply.
I was talking regarding the daily allowance in terms of TA and DA provided to the employees in the travel policy i.e. when they are away from the office but are on office duty like tour to plants etc. OR I might be getting confused with Dearness Allow and Daily Allow....This is not the part of CTC just wanted to mention in the Travel policy...
Is it necessary to pay the same to the employee??
Looking forward towards ur reply...
Thanks
Rgds
Supriya

Normally when employees move on tour their expenses are reimbursed. The employees are working for the establishment and therefore, they should be paid whatever expenses they meet in connection with that trip, like ticket fare, bills of hotel room etc.

In some organisations there will be specific tour policy wherein it will be clearly stated that who all are eligible to travel in AC classes of trains, how much amount per day each category of employee can spend for food and accommodation, how much amount per day each can spend for their local conveyance etc. In some cases, the travel fare will be fixed per kilo meter travelled. Similarly, food and accommodation charges will also be fixed per day. Whether you stay in hotel or dine at restaurants or not you will get the amount fixed and, of course, the said amount can be daily allowance. In other case, the reimbursements subject to a certain limit will be permitted on production of bills. These are purely internal matters of the company and has nothing to do with any legal set up. Therefore, the company can revise the policy also.

Therefore, if your policy permits staying in guest houses owned by the company only, then there is no need to give any allowance for that. Similarly, if you have dining facilities for your staff, you need not pay that also. In such cases, you can restrict tour allowance to train/ bus/ air fare.

Regards,

Madhu.T.K

Thanks Madhu,
That means that it is not necessary to pay Daily allowance to an employee, if the employee is visiting for official work and fooding and lodging is being provided by the company itself.
Please answer one more question for me....Is there a difference between Dearness Allowance and Daily Allowance??
Thanks in advance :-)
Rgds
Supriya

As stated in my first reply, dearness allowance is an allowance forming part of salary which is paid to compensate cost of living whereas daily allowance is just an allowance which has more element of reimbursement rather than part of salary.
Regards,
Madhu.T.K

Hi,
I would like to know what is the decent acceptable DA ( on travel) is allocated to the Employees. Currently i have it as Rs.500/- for Managers and Rs.300/- for Technicians/Sales Executives. Especially from NCR/Punjab/Rajasthan - i keep getting requests that this is not sufficient.
Request you to let me know if this is the decent amount to survive? Earlier there was not Travel policy so they were used to claiming what ever they were spending.
Thank you,
Poornima
HR Consultant

Dear all i am from media industries & govt notified majathiya pay commission for working & non working journalist . Pay commission introduces variable pay . Will it be replace to dearness allowance?
Request to let me know whether we will get both this or newly introduced variable pay only.

Variable Pay and Variable Dearness Allowance are two different components of salary. I have not gone through the Pay Commission's recommendations but as far as I understand the Variable Pay will be outside the Fixed Pay and payment of Variable Pay will be based on various conditions like, performance, achievement of a certain target etc. At the same time, dearness allowance is a component of fixed salary which is paid to compensate the increases in cost of living and is a part of statutory salary also. Therefore, in no way the dearness allowance can be replaced.
Madhu.T.K

Dear All, Please share your views, DA(Daily Allowances) paid along with TA(Travel allowances) is it taxable? If so please share reasons. Employee submits bills for TA, but no bills against fixed DA as per grade, as per policy. I appreciate for your time and revert.