Is a Dearness Allowance Mandatory in Industrial Wages, or Can We Stick to Basic and HRA?

Please advise whether any act (or any case law) specifies that there must be a DA component in the wage structure. Alternatively, do minimum wages have to include a DA component? Can I not bifurcate the minimum wage into BASIC+HRA only? Has anyone contested this issue? Is there any case reference available? I am asking this only in the context of the industrial sector and not government organizations. Please give feedback.

Dear Ylawande,

In the government sector, Dearness Allowance (D.A.) is a part of a person's salary. D.A. is calculated as a percentage of the basic salary. This amount is then added to the basic salary along with house rent allowance to get the total salary. Rates vary as per rural/urban areas, etc.

In the private sector, there is no such law mandating Dearness Allowance. As I mentioned earlier, in the private sector, there is no law regarding D.A., so you can separate minimum wages into Basic and HRA.

KATYANA

Reply to Mr. KATYANA,

I have a question. If you consider minimum wages as the sum of Basic + HRA, on what amount will you deduct PF? Would you include the HRA amount along with the basic for PF deduction?

No, only Basic will be considered for calculating PF. HRA will not be considered for the same.

Based on the company policies, the minimum wage can also be a combination of Basic + DA + HRA. In this case, only Basic and DA will be considered for PF calculation.

Regards,
Viraj

Dear hmchaturvedi,

You can divide minimum wages into BASIC + DA + HRA. Mr. Viraj has cleared the doubt. As we all know, in a private sector organization, there is no concept of DA, so we cannot consider DA for calculation. For the deduction of PF, you will consider BASIC ONLY AND NOT HRA.

KATYANA

Dear friends,

It is not like that. I have referred a case from Haryana regarding bifurcating minimum wages into basic + conveyance or HRA, etc. The court said that you cannot bifurcate the minimum wage into basic + conv. and that it is a subterfuge to avoid statutory liability of PF. Therefore, minimum wages mean basic only (see the document). Now, I want to know if there is any law that mandates paying DA with basic.

Dear friends,

As per the attached details, please suggest the calculation of dearness allowance.

Thanks,
Mamta Singh

In Tamil Nadu, is there a rule that DA has to be compulsorily a part of the salary structure for private companies?

Please suggest.