Is Dearness Allowance and LTA Required in Maharashtra's Factory Worker Salaries?

Dear Expert, I wanted to inquire about the following points:

1. In Maharashtra, is Dearness Allowance mandatory to include in the salary structure for a worker who is employed in factory production, even if we adhere to the minimum wages and their basic salary is equal to or exceeds the minimum wages?

2. Is it compulsory to provide LTA (Leave Travel Allowance) as a component of the workers' salary?

I am looking forward to your response on these matters.

Regards, Amit

Consolidated Wages and Minimum Wages

The state-declared minimum wages and DA combination may be phrased as "consolidated wages," but it should not be lower than the combination of these two declared by the government.

Leave Travel Allowance (LTA)

LTA is available once every two years, so it does not affect the explanation of salary or wages.

Thank you.

Normally, the determination of wages and their structure is a matter of collective bargaining. However, whenever the component of variable D.A. is added to the statutory minimum wage structure, the minimum wages are bound to increase periodically with the periodical rise in the Cost of Living Index. Therefore, the absence of dearness allowance in the industry wage structure as a distinct component can cause a mismatch between the two over time as industry wages are fixed on a long-term basis.

As per the definition of the term wages under Section 2(y) of the Code on Wages, 2019, which will be effective from April 1, 2021, only the components of basic pay, dearness allowance, and retaining allowance (if any) in the wage structure will be considered as "wages." This is subject to the condition that the minimum proportion of their sum total must be 50% of the gross monthly wages payable, including any other allowances. Any shortfall in this regard will be rectified by a proportionate adjustment of other allowances in the wage structure for the purposes of wages under the Code. The same method should be employed in determining the parity between industry wages and statutory minimum wages.

L.T.A., being a fringe benefit, cannot be part of wages.

Kindly review the corrections and let me know if you need further assistance.

Thank you for the clarity. I just wanted to know if worker unions are demanding to keep it as a part of the salary, do we have any obligation regarding it? Kindly suggest.

Justification for Fringe Benefit Demands

It is better to ask for the justification behind such a demand. When a fringe benefit item cannot be statutorily included in the wage structure, it cannot be demanded to be included by the trade union merely for the sake of popularity. In the first place, such a demand would be totally untenable. Even if included and subsequently removed or refused to be paid, the workmen cannot stake their claim to recover it as a denial of a component of wages. In my opinion, if the proportion of 50:50 is constantly maintained in respect of the included and excluded components of wages as stipulated under section 2(y) of the Code of Wages, 2019, there cannot be any disputed claim under the Code.

Differences in Fringe Benefits and Allowances

Moreover, the purpose, conditions of eligibility, and the periodicity of payment of the fringe benefit of LTA are different from the monthly payable other allowances.

Suggestion for Union Negotiations

Under the circumstances, I would like to suggest that you may consider and convince the union to effect a separate bilateral settlement or a separate clause dealing with LTA in the wage settlement under the Code on Industrial Relations, 2020.