Is payment of time to time revised DA is mandatory if employee’s gross salary is higher than minimum wages (Basic + DA) Our salary structure is Basic + DA + Other Allowance
From India, Thane
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From India, Thane
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Dear Bhaskar,
As per the ratio decidendi of the judgment of the Supreme Court in Air Freight Corporation's case, whatever the wages may be – whether statutory minimum wages or industry gross wages – it has to be taken as a single package for comparison purposes by leaving out the excluded components in the definition of the term "wages" under Section 2(h) of the MW Act, 1948. Thus, if the industry wages so computed remain at par with or above the statutory minimum wages, the compliance is complete and there is no problem. However, the employer must also consider that the D.A. fixed under the Act is subject to periodical revision, and hence, ensure parity then and there.
Thank you.
From India, Salem
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6185As per the ratio decidendi of the judgment of the Supreme Court in Air Freight Corporation's case, whatever the wages may be – whether statutory minimum wages or industry gross wages – it has to be taken as a single package for comparison purposes by leaving out the excluded components in the definition of the term "wages" under Section 2(h) of the MW Act, 1948. Thus, if the industry wages so computed remain at par with or above the statutory minimum wages, the compliance is complete and there is no problem. However, the employer must also consider that the D.A. fixed under the Act is subject to periodical revision, and hence, ensure parity then and there.
Thank you.
From India, Salem
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Thanks for your valuable reply. My query is, although Gross Wages of employee is higher than minimum wages, is it mandatory to give periodic hike of DA?
From India, Thane
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From India, Thane
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Dear Bhaskar,
I've already answered your question and therefore request you to read it once again. For comparison purposes, the respective sum totals of both the industry wages and the statutory minimum wages have to be taken. Here, what is important is that the gross industry wages minus the excluded components should only be compared against the sum total of the minimum wages. The difference between the individual components doesn't matter as long as the sum totals are equal or the industry wages are more than the minimum wages. Hence, it is not mandatory to give any periodic hike in the industry wages in tune with the hike in the D.A. of the minimum wages as long as the sum total of the industry wages remains equal to or more than the minimum wages.
From India, Salem
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I've already answered your question and therefore request you to read it once again. For comparison purposes, the respective sum totals of both the industry wages and the statutory minimum wages have to be taken. Here, what is important is that the gross industry wages minus the excluded components should only be compared against the sum total of the minimum wages. The difference between the individual components doesn't matter as long as the sum totals are equal or the industry wages are more than the minimum wages. Hence, it is not mandatory to give any periodic hike in the industry wages in tune with the hike in the D.A. of the minimum wages as long as the sum total of the industry wages remains equal to or more than the minimum wages.
From India, Salem
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Dear Bhaskar,
I may add, as you are aware, many employers in the organized sector generally follow gross monthly salary broken into various components such as basic, other allowances like FDA+VDA, HRA, conveyance allowance, medical allowance, LTA, etc., plus other fringe benefits. There are also some employers who don't break but keep a consolidated pattern which used to be more than the minimum wages fixed by the respective state governments under the Minimum Wages Act. In this case, a hike in gross salary is given which may not be in a uniform pattern across the board. Whereas those who follow an HR Remuneration policy which provides a set pattern comprising Basic pay plus other allowances can grant periodical increases both in basic as well as in DA and other allowances. Such employers who link their DA components with all India Wholesale/consumer price indices, mostly in the organized sector, normally implement increases/decreases in DA commensurate with movement in indices published by GoI from time to time, maybe either quarterly or half-yearly basis. Therefore, if your remuneration policy especially with respect to DA is linked to price indices, you have to follow the same. If you have none, a general increase in wholesome salary will suffice.
From India, Bangalore
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I may add, as you are aware, many employers in the organized sector generally follow gross monthly salary broken into various components such as basic, other allowances like FDA+VDA, HRA, conveyance allowance, medical allowance, LTA, etc., plus other fringe benefits. There are also some employers who don't break but keep a consolidated pattern which used to be more than the minimum wages fixed by the respective state governments under the Minimum Wages Act. In this case, a hike in gross salary is given which may not be in a uniform pattern across the board. Whereas those who follow an HR Remuneration policy which provides a set pattern comprising Basic pay plus other allowances can grant periodical increases both in basic as well as in DA and other allowances. Such employers who link their DA components with all India Wholesale/consumer price indices, mostly in the organized sector, normally implement increases/decreases in DA commensurate with movement in indices published by GoI from time to time, maybe either quarterly or half-yearly basis. Therefore, if your remuneration policy especially with respect to DA is linked to price indices, you have to follow the same. If you have none, a general increase in wholesome salary will suffice.
From India, Bangalore
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Whether the periodic revision of Dearness Allowance is mandatory depends on several factors, including local labor laws, the terms of employment contracts, and the policies of the specific organization. Here are some general principles that apply:
Legal Framework
Labor Laws: In many jurisdictions, labor laws stipulate the minimum wages requirements, which often include both Basic Pay and DA. Employers are legally required to ensure that their employees' wages do not fall below the prescribed minimum wage, which is periodically adjusted for inflation through DA.
Minimum Wage Compliance: If an employee's gross salary is already higher than the mandated minimum wage (Basic Pay + DA), the employer may not be legally required to revise DA as per the statutory rates. The primary legal obligation is to ensure that employees receive at least the minimum wage.
Employment Contracts and Company Policy
Contractual Obligations: Employment contracts may specify terms regarding DA and its revisions. If the contract includes provisions for periodic DA adjustments, the employer is contractually obligated to comply, regardless of whether the gross salary exceeds the minimum wage.
Company Policy: Some organizations have internal policies that provide for regular DA revisions as a matter of practice. In such cases, even if an employee's gross salary is higher than the minimum wage, the company might still revise DA periodically in accordance with its policy.
Practical Considerations
Employee Morale and Retention: Regularly revising DA can help maintain employee morale and retain talent, as it shows that the employer is responsive to inflation and cost of living increases.
Fairness and Equity: Ensuring that all employees receive periodic DA adjustments can promote a sense of fairness and equity within the organization.
Example Scenario
Consider an employee whose gross salary is ₹20,000 per month, while the statutory minimum wage (Basic + DA) is ₹15,000. If the local labor law requires DA adjustments to account for inflation but the gross salary already exceeds the minimum requirement, the following could apply:
Legal Compliance: The employer is not legally required to revise DA as long as the gross salary is above the minimum wage.
Contractual Obligation: If the employment contract specifies DA adjustments, the employer must comply with these terms.
Company Policy: If the company has a policy of revising DA periodically, it should follow this policy to maintain consistency and employee satisfaction.
Conclusion
In summary, while the primary legal requirement is to ensure wages meet or exceed the statutory minimum, including DA, other factors such as employment contracts and company policies can influence whether periodic DA revisions are mandatory. Employers should carefully review these factors and ensure compliance with all relevant obligations.
From India, Mumbai
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Legal Framework
Labor Laws: In many jurisdictions, labor laws stipulate the minimum wages requirements, which often include both Basic Pay and DA. Employers are legally required to ensure that their employees' wages do not fall below the prescribed minimum wage, which is periodically adjusted for inflation through DA.
Minimum Wage Compliance: If an employee's gross salary is already higher than the mandated minimum wage (Basic Pay + DA), the employer may not be legally required to revise DA as per the statutory rates. The primary legal obligation is to ensure that employees receive at least the minimum wage.
Employment Contracts and Company Policy
Contractual Obligations: Employment contracts may specify terms regarding DA and its revisions. If the contract includes provisions for periodic DA adjustments, the employer is contractually obligated to comply, regardless of whether the gross salary exceeds the minimum wage.
Company Policy: Some organizations have internal policies that provide for regular DA revisions as a matter of practice. In such cases, even if an employee's gross salary is higher than the minimum wage, the company might still revise DA periodically in accordance with its policy.
Practical Considerations
Employee Morale and Retention: Regularly revising DA can help maintain employee morale and retain talent, as it shows that the employer is responsive to inflation and cost of living increases.
Fairness and Equity: Ensuring that all employees receive periodic DA adjustments can promote a sense of fairness and equity within the organization.
Example Scenario
Consider an employee whose gross salary is ₹20,000 per month, while the statutory minimum wage (Basic + DA) is ₹15,000. If the local labor law requires DA adjustments to account for inflation but the gross salary already exceeds the minimum requirement, the following could apply:
Legal Compliance: The employer is not legally required to revise DA as long as the gross salary is above the minimum wage.
Contractual Obligation: If the employment contract specifies DA adjustments, the employer must comply with these terms.
Company Policy: If the company has a policy of revising DA periodically, it should follow this policy to maintain consistency and employee satisfaction.
Conclusion
In summary, while the primary legal requirement is to ensure wages meet or exceed the statutory minimum, including DA, other factors such as employment contracts and company policies can influence whether periodic DA revisions are mandatory. Employers should carefully review these factors and ensure compliance with all relevant obligations.
From India, Mumbai
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