Hello Seniors, Please let me know that, whether DA is a compulsion for private ltd companies or only government employees . Is it applicable to all employees? thanking you.
From India, Mumbai
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From India, Mumbai
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Understanding Dearness Allowance (DA) in Salary Components
Dearness allowances are a part of the salary component meant to neutralize the erosion of basic wages caused by inflation. There is no hard and fast rule that salary must reflect DA separately as long as it serves this purpose. Salary can be paid as a lump sum even to employees covered by the Minimum Wages Act if the total salary equals or exceeds the minimum wages prescribed for that specific category of employee in that establishment as notified by the government. However, if the salary is not structured into basic or DA components, there is a likelihood of the entire salary being considered for calculating PF contributions and gratuity.
Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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1931Dearness allowances are a part of the salary component meant to neutralize the erosion of basic wages caused by inflation. There is no hard and fast rule that salary must reflect DA separately as long as it serves this purpose. Salary can be paid as a lump sum even to employees covered by the Minimum Wages Act if the total salary equals or exceeds the minimum wages prescribed for that specific category of employee in that establishment as notified by the government. However, if the salary is not structured into basic or DA components, there is a likelihood of the entire salary being considered for calculating PF contributions and gratuity.
Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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Dearness Allowance in Private and Government Sectors
Dearness Allowance (DA) is not exclusive to government service; it is also present in the private sector. However, DA based on the Consumer Price Index may not be provided in new-generation industries. The implications of DA have been correctly explained by Mr. Saikumar. The consolidated pay will increase employers' costs not only for EPF but also for gratuity, ESI, bonus, etc.
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
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Dearness Allowance (DA) is not exclusive to government service; it is also present in the private sector. However, DA based on the Consumer Price Index may not be provided in new-generation industries. The implications of DA have been correctly explained by Mr. Saikumar. The consolidated pay will increase employers' costs not only for EPF but also for gratuity, ESI, bonus, etc.
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
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As other members have explained, DA is paid to compensate for the rise in inflation. It is not mandatory for private sector employers to show it separately. However, there is a recognized practice to structure the pay into Basic Pay, DA/VDA/IDA, HRA, TA, etc., so that various related liabilities are calculated easily with less financial burden on the employer. The government notifies an increase in minimum wages based on the price index, which is applicable to private sector employees. However, its implementation may be a question of fact.
Regards,
Srivastava
From India, New Delhi
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Regards,
Srivastava
From India, New Delhi
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Dearness Allowance.xls
Dearness Allowance in India-The history.doc
Final Dearness Allowance for the month of July 2021 to December 2021.pdf