Minimum Wage Notifications and VDA Payment
Under the various Minimum Wage notifications, a VDA of Rs. 417.60 per month is payable for the period from 1st April 2020 till 31st March 2021. Employers must pay this deferred VDA to their employees after 31st March 2021. This will be in addition to the VDA applicable from 1st April 2021 onwards.
A notification was issued by the State on July 20 this year.
Postponement of VDA Payment
The Department of Labour, Government of Karnataka, via its order No. KaE 72LWA 2020 dated 20.07.2020, has permitted the postponement of payment of VDA payable under various Minimum Wages Notifications by employers for the period from 01.04.2020 to 31.03.2021. This measure aims to mitigate the hardship faced by employers who were directed by the Central Government to pay wages, including VDA, to their employees during the lockdown period.
Implications of the Order to Defer VDA
a. Employers can avail themselves of this facility and defer the payment of VDA of Rs. 417.60 per month, which has become payable from 01.04.2020 to 31.03.2021 under various Minimum Wage notifications.
b. Employers will have to pay the deferred VDA after 31.03.2021 to their workmen, in addition to the VDA applicable from 01.04.2021 onwards.
c. If employers choose not to pay VDA, they will not be liable to pay ESI and PF on the deferred VDA.
d. However, ESI and PF will become payable when the deferred VDA is paid after 31.03.2021.
e. When the deferred VDA is paid, employers will also have to pay the difference in bonus, leave with wages, and overtime payment.
f. These options are available for VDA payable to Contract Labourers as well.
Karnataka High Court's Interim Order
The High Court noted that there was no mention by the state government in any of its documents that the notification was issued as per Section 26(2) of the Minimum Wages Act. The Karnataka HC has stayed the notification deferring payment of Variable Dearness Allowance to workers from April 1, 2020, to March 31, 2021.
By way of an interim order, the Karnataka High Court on Friday stayed the execution and operation of a state government notification allowing industries to defer payment of Variable Dearness Allowance (VDA) to all classes of workers between April 1, 2020, and March 31, 2021.
A division bench comprising Chief Justice Abhay Shreeniwas Oka and Justice Ashok S Kinagi passed the interim order on 11.9.20, staying the notification dated July 20, 2020, to defer the VDA, which forms part of the minimum wages.
The bench passed this interim order after hearing a batch of public interest litigations questioning the legality of the notification issued by the state government. The government issued the notification after a meeting with representatives of employers who expressed helplessness in paying VDA due to the lockdown amid the COVID-19 pandemic, despite strong opposition from trade unions.
The Court noted that there was no mention by the state government in any of its documents that the notification was issued as per Section 26(2) of the Minimum Wages Act. Earlier, the notification was issued by the State on July 20 this year.