Understanding Variable Dearness Allowance: When Can It Be Removed from a Worker’s Salary?

When can Variable Dearness Allowance (VDA) be removed from a worker's salary?

Please tell me any rule of the Supreme Court ruling.

Minimum Wages and Variable Dearness Allowance (VDA)

The minimum wages payable to workers comprise two components: a basic wage and a dearness allowance (VDA), which varies according to changes in the consumer price index (CPI). The purpose of paying VDA, which adjusts with changes in the cost of living, is to ensure that workers do not suffer due to an increase in living costs. As long as your total salary is above the minimum wages and is subject to increase with the rise in the cost of living, there is no need to pay VDA as a separate component of the salary. This was confirmed by the Apex Court in the case of AirFreight India vs. State of Karnataka.

Ensuring Compliance with Basic Wages and DA

What needs to be ensured is that, at any point in time, the salary you pay should not be less than the basic wages and DA fixed by the government. In states like Tamil Nadu, CPI-based DA is revised once a year, but there are states where it is revised every six months or even every month. In such cases, it is advisable to follow a system of basic wages and DA for those workers whose wages are almost equal to the statutory minimum wages. At the same time, if there is a margin of, say, Rs 500, you can drop the DA component from the salary structure.

Hi, what Mr. Madhu said is absolutely true. As long as you are paying more than the minimum wage of the respective state and ensuring that every year you are taking care of changes in the consumer price index, you need not show the DA component. However, you need to ensure that the basic salary is more than the minimum wage. For example, if your minimum wage is Basic 13500 + DA 3000 PM, then your basic salary should be more than Rs. 16500. Minimum wage cannot be distributed to other components like HRA, conveyance, washing allowance, etc.

Mr. Kannan, Minimum wage means it is Basic and DA. At any point in time, the DA component cannot be converted to other allowances; it needs to be added to the Basic only. When you are paying more than the minimum wage, the excess amount can be distributed to other allowances like HRA, Conveyance, etc.