Is Dearness Allowance Included in Private School Salaries in Maharashtra? How Is It Calculated?

Hello everyone, can anyone tell me if the Dearness Allowance is part of the salary structure for private organizations or schools in Maharashtra? If yes, how is it calculated or at what percentage of the basic salary is the DA calculated?

Initially, the determination of the salary structure of employees lies with the individual employer. However, in due course, it becomes a subject for collective bargaining between the employer and employees, depending on external factors such as unionization, gradual wage hikes in similar industries in the region, and the rising cost of living. These factors substantially affect the existing real wages and lead to the structuring of wages into basic wages and other allowances in wage and salary administration. No private enterprise is exempt from this phenomenon, as private employers strive to reduce indirect and long-term financial commitments by allocating a significant portion of total salary or wages to allowances.

Dearness Allowance

Among these allowances, dearness allowance holds a unique position due to its ability to counter inflationary trends. It is considered an essential and inclusive component for all employment benefits, including EPF, gratuity, and the calculation of wage parity between minimum and industry wages. Generally, the dearness allowance is linked to a Cost of Living Index, with a specific base year, and is periodically adjusted based on changes in the Consumer Price Index.

Legal Mandates and the Minimum Wages Act

As far as I am aware, there is no law mandating dearness allowance as a compulsory component of the salary structure. However, in scheduled employments under the Minimum Wages Act of 1948, where minimum wages are set by the appropriate government, variable dearness allowance becomes an integral part of the fixed minimum wages. Employers within the scope of the Minimum Wages Act of 1948 are obligated to include variable dearness allowance to ensure wage parity between statutory minimum wages and industry wages.

Impact of the Code on Wages 2019

With the implementation of the Code on Wages in 2019, every employer is required to introduce dearness allowance into the wage structure to comply with the definition of wages as per Section 2(y) of the Code. This inclusion is essential to maintain the proportionality of the included and excluded components for the Code's purposes. It is noteworthy that although education is considered an industry, teachers are not classified as workmen under labor laws, except for provisions related to gratuity and EPF.

Definition of Wages Under the Wage Code

When the definition of wages under the wage code and other codes is implemented, DA will be one component of wages. However, the definition does not specify whether it will be Variable DA (VDA) or Fixed DA (FDA).

Splitting Basic as DA

Therefore, it will be possible to split one portion of Basic as DA (FDA) to show as a part of wages. If it is Variable DA, then there must be a DA scheme mentioning the base year, initial index, review mode - monthly, quarterly, half-yearly, yearly, neutralization method - per point basis, % method basis, slab system basis, etc.

In the absence of all the above, in my opinion, it may be possible to keep only Basic (considering it as Basic + DA) for the fixation of wages. In the case of minimum wages, it is Variable DA as it is revised in most of the states at an interval of 6 months against one base year and increase/decrease of CPI.

Regards, S K Bandyopadhyay (WB, Howrah) CEO- USD HR Solutions [Phone Number Removed For Privacy-Reasons]