Is Paying DA Mandatory for Startups Under Shops and Commercial Establishments?

We are a new startup under Shops and Commercial Establishments. Is it mandatory to pay DA as a pay structure component? Please let me know.

Kind Regards,
Shreyas

DA stands for Dearness Allowance, and it is not compulsory in the salary structure.

It's important to keep in mind that while offering a salary, it should not be less than the minimum wage (including Basic + Special Allowance).

Yes, you can exclude it. However, in that case, you need to ensure that the basic pay of the employee is higher than the Basic + DA mentioned in the minimum wage notification currently applicable (and keep revising if it falls below the limit).

In case your establishment is covered under the Minimum Wages Act, you have to pay the minimum wages stipulated. The minimum wages payable per month can be bifurcated as Basic and other allowances as per the company policy, or you can pay a lump sum amount as wages. It should not be less than the minimum wages.

It is not a compulsory component to pay as per the Shops & Establishment Act. However, if you are an employer contractor, you may be questioned during audits.

Thank you.

Dearness Allowance in Salary Structure

Dearness allowance is a component of salary and wages under the Payment of Wages and Minimum Wages Act. It can be omitted, but you have merged it with the basic salary.

Thanks and regards,

Sumit Kumar Saxena

Understanding Basic Salary and D.A. Under the Minimum Wages Act

Under the Minimum Wages Act, the basic salary is a combination of Basic + D.A. If the basic salary is higher than the minimum wages, then it is not mandatory to show D.A. in the salary structure.

Regards

Understanding Basic and Dearness Allowance (DA)

As you all have mentioned that Basic + DA is what we refer to as basic exactly, then why is DA not compulsory? What is the reason for this? Could someone please elaborate on this for general knowledge?

Insights on Minimum Salary Wages

Additionally, if possible, please share some insights on minimum salary wages. How is it determined and on what criteria has it been set?

Thank you.

Regards

Minimum Wages and Dearness Allowance Information

Information pertaining to minimum wages applicable to various industries can be obtained from the information and statistics section of the Labour Department (Office of the District Labour Officer) in your State/District.

Dearness Allowance (DA) Methods

Regarding Dearness Allowance, companies adopt various methods. Some companies split up Dearness Allowance as FDA (Fixed DA) - a certain percentage of the basic salary, and Variable DA (VDA) - which is determined based on the Consumer Price Index numbers received from the Labour Bureau, Shimla.

Whether you have a Dearness Allowance component or not, the total emoluments should be greater than or equal to the minimum wages declared by the authority applicable to your industry in your State. This is to be kept in mind.

Thanks,

R K Nair

DA in Salary Structure

DA is not necessary in your salary structure, but you should pay the basic salary more than (basic + DA). Otherwise, you will face problems. You should maintain minimum wages as per your industry.

Thank you.