Understanding Variable Dearness Allowance: How Does It Change and How to Calculate It?

Dear Friends,

Can anyone help me with Variable Dearness Allowance (VDA)? What is VDA, how often does it change, and how should we calculate it?

Regards,
S.V. Jayapal Reddy

Dear Jaipal,

VDA stands for Variable Dearness Allowance. I presume that your employer pays FDA and VDA as part of your salary. The points are fixed in the Long Term Settlement. The VDA revision is done every six months based on the minimum wage revision. Please refer to your LTS and work accordingly.

Regards,
Bhushan

Dear S.V,

I would like to add to what Bhushan had said regarding the VDA. It is changed according to the Government Notification, which is released periodically based on the increase or decrease of the Consumer Price Index (CPI) and must be referred to.

Regards,
SC

Hi Jaypal Reddy,

This is Sudheer. I think you spoke to me on this topic. This is basically a Known Variable Dearness Allowance linked with the Consumer Price Index, which is published by the Government of India. Normally, we enter into an agreement with the Union based on 1960 or 1980 and decide on how much amount per point to pay quarterly or half-yearly. We obtain these points from our FAPCCI. We calculate the same based on the linking factor and find out any increase or decrease and pay accordingly.

S. Sudheer Reddy

Hello All,

I need your input/advice/comments on the following concern: My organization has been providing Basic + FDA to our employees. A request for a change to Basic + VDA has been received. I need to know the following: How is VDA calculated in order to make a comparison between FDA & VDA.

Awaiting your responses.

Variable DA is subject to change based on fluctuations in the consumer price index. The base index will vary depending on the industry and the agreement reached by the respective state's minimum wages committee. VDA will be calculated based on each increase in the consumer price index from the fixed base. Thus, referencing the CPI is essential for monthly VDA payments. Typically, VDA is a component of determining the minimum wage. In a specific industry (such as plywood, coir, or leather sector), all employees will receive the same VDA regardless of their basic salary.

On the other hand, Fixed DA is a set percentage of the basic salary. Therefore, a higher basic salary will result in a higher FDA. Fixed DA may not remain constant for an extended period. It can be adjusted periodically in line with CPI changes, though not frequently. The FDA amount will vary based on the individual's basic salary.

Regards,
Madhu.T.K

Thank you very much. Can you explain with an example? For example, VDA for a skilled worker is Rs 8 per day. The index is (I guess) 2001-100. How should I interpret and calculate? Is there some more information required?

Collect the current CPI of your area. Let it be 130. Then, for every increase in the CPI over and above 100 (base), you have to pay VDA at Rs 8 per day. That is, the increase in CPI is 30 (130 - 100), and the VDA will be Rs 240 multiplied by 26 (for daily rated workers) or 30 (for monthly rated workers).

Regards,
Madhu.T.K

Hi,

Every six months, VDA will change. The change is based on the consumer price index points.

Regards,
Krishna