Is It Legal to Exclude Dearness Allowance from Salary? Seeking Clarification and Advice

Concern About Salary Structure Without DA

I work in a mid-sized firm where the number of employees is slightly above 200. I find it very amusing that the salary structure here does not include DA as a component. When I inquired about this, they mentioned that there is no need for DA. I would also like to point out that the salary structure here comprises Basic (40% of Gross), HRA (Half of Basic), Conveyance Allowance (Fixed/1600), and Special Allowance (Gross - Basic + HRA + Conveyance). I am new to the corporate world, but based on my academic knowledge, DA is typically a mandatory part of the salary structure and should be included.

Please provide further clarification on this matter. If the exclusion of DA from the salary structure violates any legal regulations, kindly specify the appropriate platform where I can lodge a complaint.

Thank you.

The salary of employees may be of any structure, i.e., consolidated or broken into different components, but it has to be treated as a single package only. There is no legal compulsion in any law in this regard or any such exclusive law in India other than the Maharashtra Workmen's Minimum House Rent Allowance Act, 1983.

When you have a salary structure comprising different components such as basic pay, dearness allowance, HRA, conveyance allowance, etc., the employer stands to have lesser indirect financial commitments towards fringe benefits like bonus, gratuity, etc.

However, when employees come under the purview of the Minimum Wages Act, 1948, in the absence of dearness allowance, the employer has to ensure parity of industry wages with the statutory minimum wages which have the variable dearness allowance component linked with the Cost of Living Index.

If Basic Pay paid by your company is above Basic pay and DA fixed by the appropriate government, then there is no problem. However, if your company has ignored DA to save on PF, ESI contributions, and payment of Gratuity, it will boomerang on your company.