This is nothing but Special Allowance paid as a component of Salary. As per law special allowance (other than Dearness Allowance) is paid to such employees who take some additional responsibility, additional risk in carrying out his duties and is not paid at par with other employees. This is an amount which covers/ defray some additional expenses incurred by an employee to keep his knowledge updated or health in tact which may be affected due to the nature of the work. This is something additional that a particular category of employees get as part of their remuneration.
In the current scenario of private establishments, where there is no parameters for fixation of salary, we fix as per the market and in this process, we will first decide how much should be one's salary, then put a fraction of it as basic salary (probably, the least because there is a tradition that it is on the basic salary only that we need to pay PF, Bonus, Gratuity and other statutory benefits!!!) put one component as HRA, another as conveyance and a huge sum as Special Allowance. Surprisingly, this special allowance is paid to all, including clerks who work in the office and worker who enters into high temperature vessel as part of his ordinary work. In this fixation, the so called special allowance is not the one which is under discussion. The special allowances which are commonly paid to all employees irrespective of the fact whether they take any additional responsibility or is paid to defray any special expenses, are considered as part of Salary on which PF, Bonus, Gratuity etc should be paid. On the other hand, the special allowance which is mentioned above as some amount paid to cover special expenses which is paid only to those who take any special task, is not part of salary for the purpose of PF, bonus, gratuity and other payments.
Madhu.T.K