Is It Mandatory for Private Companies to Pay DA? Seeking Clarification and Insights

Kindly clarify if DA is statutory for a private company to pay.

Hope to get some decent answers soon.

Thanks,
Faizan

DA is part of the minimum wages prescribed by State Governments. The basic pay + DA is the minimum wage. The basic pay can be fixed as a single entity by adding the DA. Alternatively, the minimum wages can consist of two components, i.e., Basic Pay and DA.

S. Krishnamoorthy

It is true that minimum wages take care of the cost of living index, price index, or whatever. So, giving DA is not statutory. But my question is a little bit different. Suppose a private company shows Basic and D.A. separately on Payroll/Payslip, is it necessary that all regulations governing DA, including periodical revision in DA, are binding to it? Second, what is the logic when some companies keep D.A. separate on Payroll? Is there any harm or a possible problem on account of it?

Expert Advice Solicited

What should be the ideally worked-out pay structure for Indian companies?

Thanks

Dear Faizan,

Please check the thread name given below posted here in cite hr by a member. Hopefully, it will be helpful to you. However, please do cross-check its authenticity:

Is it necessary to show DA separately in salary design?

Dearness Allowance (DA) Obligations

There is no law making the payment of dearness allowance compulsory. However, most minimum wage notifications from State Governments include a DA component linked to a Consumer Price Index Number. If you are paying according to these minimum wage notifications, it becomes a statutory obligation to pay the increased DA component when the State Government raises the minimum wage.

Additionally, if you have signed a long-term settlement with your union that includes a formula for DA payment, it becomes a contractual obligation to adhere to it. Any violation of this agreement can be addressed by the union under Section 33C of the Industrial Disputes Act.

Understanding Dearness Allowance (DA)

The term DA implies a variable, and the value is determined by pegging it against an index, i.e., the Consumer Price Index for industrial workers in the case of factories. Under normal circumstances, it would be relevant only for minimum wages, wherein there is a possibility of underpayment.

In any other vocation, companies don't factor this, and compensation is pegged against market factors, e.g., external equity.

Regards,
Faizan

I am working in a software organization. We have introduced Basic and DA since the Labor Inspector insisted on it a few years back.

As an HR professional, I have observed that many software organizations have not implemented the "DA" concept. In the meanwhile, there is Government Order (GO) No.14, dated 5-Mar-19, which provides the minimum rates of basic wages per month zone-wise. However, it does not mention the minimum amount for "DA" or how to calculate it. I would like to know the following:

a) Is it necessary to adopt the concept of "DA"?

b) In the following link https://www.simpliance.in/minimum-wage/tamil-nadu, they have mentioned the VDA per month as Rs.3499/-. But the DA is changed by the Government from time to time. Hence, how do we, in a software organization, implement the change?

Kindly advise.

Regards, Mythili

Dear Friend,

DA is not compulsory for private companies. However, if you wish, you can bifurcate the basic salary into two parts - one as Basic and the other as DA.

Thanks & Regards