Dear Seniors,
Our state government has also notified the VDA along with the minimum wages. Please clarify, since VDA is notified by the state government, whether it is legally mandatory to include the VDA component in the salary structure or not?
Regards,
Rachna
From India, Agra
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Our state government has also notified the VDA along with the minimum wages. Please clarify, since VDA is notified by the state government, whether it is legally mandatory to include the VDA component in the salary structure or not?
Regards,
Rachna
From India, Agra
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Dear Rachana,
It is not statutorily mandatory to have the component of VDA in the industry wage structure. However, what is important is that the sum total of the actual wages paid to an employee/workman holding a particular post/designated job in a scheduled employment coming under the Minimum Wages Act, 1948, should not be less than the sum total of the minimum wages fixed under the Act. As per the Minimum Wages Act, 1948, the minimum wages once fixed should be periodically revised not exceeding a period of five years. You are well aware that within a span of five years, the hike in the price level will have a negative impact on the value of money, and this important factor has to be taken into account by the Appropriate Government while fixing and revising the rates of minimum wages because of the predominantly unorganized nature of employment prevailing in the scheduled employments. That's why the component of VDA is introduced by linking it to the Cost of Living Index. If you don't have the component of VDA in your industry wage structure, it is your statutory obligation to ensure that the sum total of your industry wages remains always equal to the sum total of the minimum wages fixed by the Government.
From India, Salem
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6108It is not statutorily mandatory to have the component of VDA in the industry wage structure. However, what is important is that the sum total of the actual wages paid to an employee/workman holding a particular post/designated job in a scheduled employment coming under the Minimum Wages Act, 1948, should not be less than the sum total of the minimum wages fixed under the Act. As per the Minimum Wages Act, 1948, the minimum wages once fixed should be periodically revised not exceeding a period of five years. You are well aware that within a span of five years, the hike in the price level will have a negative impact on the value of money, and this important factor has to be taken into account by the Appropriate Government while fixing and revising the rates of minimum wages because of the predominantly unorganized nature of employment prevailing in the scheduled employments. That's why the component of VDA is introduced by linking it to the Cost of Living Index. If you don't have the component of VDA in your industry wage structure, it is your statutory obligation to ensure that the sum total of your industry wages remains always equal to the sum total of the minimum wages fixed by the Government.
From India, Salem
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Some more important views on the subject matter in continuation. The terms "wages" and "salary" have been defined under various Labour Enactments differently depending on the overall objective of each Legislation. The definitions include certain components as part of the "wages" they mean and leave out other components of the wage structure for the purpose of the computation of the benefits they intend to confer on the employees covered by them. One cannot help it because wage or salary is the monetary consideration as well as part of other considerations computable in terms of money for the services rendered by the employee and from times immemorial, it is a product of demand and supply only. Hence, also the variation arising out of the inclusion and exclusion of certain components and the practice of segregation of the entire remuneration into basic wages or basic pay or basic salary and allowances. Allowances are always related to the nature as well as duration of the employment.
Therefore, while juxtaposing industry wages and minimum wages, the employer has to be more cautious about the following aspects:
(a) To arrive at the parity of the sum total of the industry wages and the minimum wages, only those components included in the definition of wages u/s 2(h) of the Minimum Wages Act, 1948 should be taken into account for inclusion.
(b) Even then, such inclusion should not result in deprivation of the quantum of any social security benefits like gratuity, EPF, etc.
From India, Salem
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Therefore, while juxtaposing industry wages and minimum wages, the employer has to be more cautious about the following aspects:
(a) To arrive at the parity of the sum total of the industry wages and the minimum wages, only those components included in the definition of wages u/s 2(h) of the Minimum Wages Act, 1948 should be taken into account for inclusion.
(b) Even then, such inclusion should not result in deprivation of the quantum of any social security benefits like gratuity, EPF, etc.
From India, Salem
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(Fact Checked)-The user reply contains accurate information regarding the definitions of "wages" and "salary" under various Labor Enactments and the importance of considering specific components for calculation purposes. The user also highlights the significance of not depriving employees of social security benefits when including components in the salary structure. Overall, the reply is insightful and provides relevant details. (1 Acknowledge point)
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Dear sir,
Since DA is not a statutory component, employers may take advantage of this to minimize EPF and bonus contributions. Frankly speaking, is this depriving employees of their benefits?
Your views, please...
From India, Agra
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Since DA is not a statutory component, employers may take advantage of this to minimize EPF and bonus contributions. Frankly speaking, is this depriving employees of their benefits?
Your views, please...
From India, Agra
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Dear Rachna,
Dearness Allowance is included in the salary or wages under the Payment of Bonus Act, 1965. It is also taken into account to compute the last drawn wages under the Payment of Gratuity Act, 1972 for the purpose of gratuity. Section 6 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 includes Dearness Allowance and Retaining Allowance in the percentage of the contribution to the EPF.
Thank you.
From India, Salem
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Dearness Allowance is included in the salary or wages under the Payment of Bonus Act, 1965. It is also taken into account to compute the last drawn wages under the Payment of Gratuity Act, 1972 for the purpose of gratuity. Section 6 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 includes Dearness Allowance and Retaining Allowance in the percentage of the contribution to the EPF.
Thank you.
From India, Salem
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(Fact Checked)-Dear Rachna, Dearness Allowance is crucial in salary structures due to various Acts such as PB Act, 1965, PG Act, 1972, and EPF Act, 1952. (1 Acknowledge point)
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Dear Rachna,
Though Umakanth sir has explained the wages concept in various aspects in relation to the concerned Act/s, even rightly interpreted by you, DA is considered as part of Wage/Salary under PF and Bonus Act. You have not mentioned the state name. In some states, DA is a compulsory part of the Minimum Wages Structure under the Minimum Wages Act, while in some states, it is on the employer's discretion whether to include DA or not.
If in your case, DA is not a compulsory part, then I would also suggest not to include this under the Salary structure. You can include other heads (HRA, Conveyance, Uniform Allowance, Special Allowance, etc.). This will minimize costs towards Bonus & EPF, since many companies are now focusing on cost optimization. You can opt for the same.
Fellow members can shed more light on the matter.
From India, Delhi
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Though Umakanth sir has explained the wages concept in various aspects in relation to the concerned Act/s, even rightly interpreted by you, DA is considered as part of Wage/Salary under PF and Bonus Act. You have not mentioned the state name. In some states, DA is a compulsory part of the Minimum Wages Structure under the Minimum Wages Act, while in some states, it is on the employer's discretion whether to include DA or not.
If in your case, DA is not a compulsory part, then I would also suggest not to include this under the Salary structure. You can include other heads (HRA, Conveyance, Uniform Allowance, Special Allowance, etc.). This will minimize costs towards Bonus & EPF, since many companies are now focusing on cost optimization. You can opt for the same.
Fellow members can shed more light on the matter.
From India, Delhi
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Creating a Competitive Salary Structure.doc
Salary Structure.zip
CiteHR.AI
(Fact Checked)-The user reply contains accurate information regarding the Minimum Wages Act, 1948, and the importance of ensuring total wages meet or exceed the minimum wages set by the government. There is no statutory mandate for including VDA in the wage structure. The explanation provided aligns with the legal framework. (1 Acknowledge point)