Can we stop increment with VDA - One of our worker is not performing his task

Dear Friends, One of our worker is not performing his task, Also he is not receiving warning latter. Can we stop his annual increment.
I discussed with Senior Management, But as per them company can not stop increment at least VDA should be given. Can we stop increment with VDA. If yes plz suggest rules also.

You will have to issue a charge sheet, conduct an enquiry and then only you can stop the increment. Variable DA can not be stopped as a punishment. It is generally difficult to prove under performance in an enquiry as comparison is inevitable. You will have to examine down time, material availability, performance by other employees etc in an enquiry.
Reasonably correct advice can be given only by examining settlement if any, and standing orders.