Should We Add DA to Office Salaries Like We Do for Factory Staff? Seeking Advice on Restructuring Pay

There is no 'DA' component mentioned in the salary structure on the office's payroll. One employee who is working at the office asked me about DA. In the factory setup (which is under the Factory Act/Minimum Wages Act), we included the DA component in the salary. Should we restructure the office staff salary, including managers, into basic, DA, etc. (office under the Shop and Establishment Act)?

You need to check with the Maharashtra Minimum Wages notification to see if there are any notified minimum wages applicable to office staff. If there are, you have to follow it and specify the DA as provided therein. Otherwise, you are free to not specify the DA component in the wages paid.

Regards,
KK

In many private companies, they have their own salary structures and allowances, which sometimes differ from company to company and from one job profile to another. For example, a company may offer travel allowance (TA), daily allowance (DA), house rent allowance (HRA), etc., to an employee who is willing to travel for company purposes. However, another employee may not receive TA if travel is not part of their job profile. Similarly, the company may not provide HRA to an employee staying in company-provided housing. These differences exist at the job profile level and can vary between companies as well.

Dear,

As per the Labour Law acts, Basic & DA are considered as Basic Salary components only. So even if you have a single component of Basic Salary (NO DA), all you have to ensure is that it should not be below the minimum wages (Basic + DA), which are revised and circulated at regular intervals.

Regards,

The following is the reply to your query.

1. Please remember that the minimum wage notification is applicable for all the shops & establishments/factories, etc., and the wage component may comprise only of basic, Basic and DA, and Consolidated, which is state-specific. That means the wage component varies from State to State. So, it is stated that the employee must get the wage either at par with the minimum wage or more than that.

2. Secondly, you must consider the PF/ESI requirements also while fixing your component. For ESI, the remittance is made on the gross, and hence you do not need to worry about the component. Similarly, for PF, there is an option of restricting the wage to Rs. 6500/-, and please remember the definition of wage as per the PF Act includes Basic, DA, and retaining allowance.

3. Thirdly, you have to consider the tax liability also while fixing the salary component so that the employee is benefitted if he falls under the tax bracket.

By keeping the above points in mind, you may fix the salary component so that everybody is getting the benefits. I will give an example in support of my above points, i.e., if an employee is getting a gross salary of Rs. 25,000/- per month, he will fall under the tax bracket. In such a case, kindly fix the salary in such a way that his PF liability is not disturbed as well as the employee is getting the tax benefit from your component. Hence, you may fix his salary like under:

a) Basic Wage = Rs. 10,000/- (40% of the gross salary. DA may or may not be included)

b) HRA = Rs. 5,000/- (50% of basic considering the cushion given for tax exemption)

c) Conveyance = Rs. 800/- (Considering the cushion given for tax exemption)

d) Medical Reimbursement = Rs. 1,250/- (Considering the cushion given for tax exemption)

e) CEA = Rs. 200/- (Considering the cushion given for tax exemption)

f) Books & Periodicals = Rs. 500/- (Considering the cushion given for tax exemption)

g) PF = Rs. 1,200/-

h) Food concessions/coupons = Rs. 3,000/-

i) Spl Allowance = Rs. 3,050/- (The balancing amount after considering the above components)

With the above components, the following will be taken care of:

1) You are not violating the PF norms since you are paying more than the restricted wage and the current minimum wages of all establishments/industries.

2) You are giving adequate benefits to the employee to get the tax exemption.

Hope, I have not confused you with so much calculation.

Regards,
P. Vathiraj
Associate Operations Manager
Aparajitha Corporate Services Limited