Hi,
DA as every one knows came into existence when the inflation and the cost of living rose so sharp (due to greater resources being spent for defence prodiction affecting adversely production and availability of goods and services for human consumption) that the rulers then had to evolve a "novel'(!) concept in installing a system of payment "related to the prevailing cost of living".
That is why DA is known to "neutralize the rising cost of living" for the employees (salary/wage earners).
This means that some part of your total wage/salary will be linked to the cost of living index (published by the government).
What started with best of intentions, has now reached alarming proportions. The method is simple and generally goes like this:
1) The parties select a particular series of cost of living index series and agree that the present wage is adequate at a particular index level, say 200.
2) Then the parties further agree that for every rise of "x" points in the index, the employees would get certain amount in addition to the wage. So over a period of time as the index keeps on rising, the employees keep on getting more and more money in their pay packets.
3) This is a single linked syatem of DA, as it is only linked to one factor-the index.
4) Clever Unions, by some superlative bargaining with their employers created an additional linkage i.e. to the baisc wage of each employee.
5) This system says that the compensation linked to the index will change as per the slabs of basic wage of the employees.
Let me explain. Consider two employees A and B, drawing basic wages of Rs. 100/- pm and Rs. 200/- pm. Assume that the compensation per slab of TEN points is Rs. 10/- pd above base slab of 200. Assume further that the current index level is 300.
Now, in the same month, the monthly DA payment to A an B in a single link system will be Rs. 100/- each
But if there was a double link system-linking DA payment both to the index and to the basic wage, then the scenarion would be, "Upto a basic wage of Rs. 100/- the compensation for rising costs will be @ Rs. 10/- per slab of TEN points as before and for higher basic wage, in excess of Rs. 100/- pm it would be Rs. 15/-pd
In such a situation, A will get DA of Rs. 100/- as above, but now B will get DA of Rs. 100/-PLUS Rs. 150/- (Total of Rs. 250/-) The Rs. 150 coming from the compensation rate of Rs. 15/- per slab rise of TEN points above index level of 200
See how one would benefit in a double link DA system (and how the employer will continue to suffer?)
Kindly do not look at the figures. They are used only to highlight the difference between the two systems. In reality things couldbe WORSE!
I hope your querry is answereed.
Regards
samvedan
November 24, 2006