Calculating Allowances and Benefits for a Textile Mill: Seeking Guidance for Software Development

Calculation of Allowances and Deductions for a Textile Spinning Mill

How to calculate dearness allowance, HR allowance, medical allowance, PF, and ESI from the basic salary for a textile spinning mill? This is to develop software for the textile spinning mill.

Regards,
SS. Tinakaran

Method for Calculating PF, ESI, DA, HR Allowance, and Medical Allowances

Please suggest the method for calculating PF, ESI, DA, HR Allowance, and medical allowances in all industries. Additionally, kindly list the necessary forms required for each activity.

I look forward to your prompt response along with an Excel sheet containing the calculation formulas.

Regards,
Girish

Please guide me on how we can calculate DA, HR Allowance, and medical allowances in all industries. Also, please mention the forms required for each activity. However, some companies or organizations calculate HRA at 20%, 25%, 28%, and 80% (the rate of HRA being 50% for metro cities and 40% for others of basic salary, and the same is applicable for DA and others – please inform us on what basis they calculate these rates).

I am awaiting your prompt reply with an Excel sheet of calculation formulas.

You must understand the basic concept of dearness allowance. It is a payment towards the rise in the cost of living, which is calculated based on the cost of living index.

As regards the minimum wages, the State Government or the Central Government makes a notification, and payment is to be made. Regarding payment at a higher level, the company can formulate its scheme for the payment of dearness allowance. It can be a fixed percentage of the basic pay or on a sliding scale, as per the company's scheme and policy.

Please remember, once the company is paying more than the minimum wages, it can formulate its scheme for the payment of dearness allowance. Needless to say, all other factors like region, industry, capacity to pay, etc., are taken into consideration by the company.

There is a difference between the government and public sector undertakings paying DA and private or limited companies paying DA.

Dearness Allowance (DA) is the allowance paid to employees due to the rise in market prices.

Generally, DA is calculated as the rise in the consumer price index. DA is connected with the basic pay; generally, it is a percentage of basic pay.

Example Calculation

Suppose we take a base CPI as 2460. If the current CPI is 3460, then the rise is 1000. The rise is calculated as 1000/2460*100 = 40.65%. Then DA will be 40.65% of Basic.

Hope this helps,

Regards,
Soundar