WE ARE UNDER SHOPS AND ESTABLISHMENT. WE ARE PAYING EPF AND ESI , PT. ONE OF OUR AUDITOR SAID THAT WHY WE ARE SHOWING DA ( Dearness allowance ) AND IS ASKING TO REMOVE DA AND TO SHOW ONLY BASIC (40%) AND TAKE OTHER AMOUNT AS OTHER ALLOWANCES . IS IT POSSIBLE TO REMOVE DA FROM SALARY STRUCTURE?
PLEASE GIVE CLARIFICATION
From India, Hyderabad
PLEASE GIVE CLARIFICATION
From India, Hyderabad
Dear Satya,
I am not sure about the actual intention behind the Auditor's so called suggestion to remove the existing component of D.A from the salary structure of the employees in your industrial establishment which falls under the State's S&E Act as well as other allied laws viz., ID Act,1947, MW Act,1948, PB Act,1965 and PG Act,1972 in addition to the ESI and EPF Acts. It may be out of his interest in minimizing the indirect financial commitment of his client towards bonus, gratuity, subscription to EPF etc. But I am constrained to state that the Auditor might have glossed over the negative legal implications of such a sudden change. They are:-
(1) You can not do away with the existing component of D.A without issuing a notice u/s 9-A of the ID Act,1947 as it amounts to a change in service conditions stipulated at serial nos.2 and 3 of Schedule IV of the Act.
(2)Removal of D.A may result in proportionate addition to other components so that the amount of contribution to EPFS get reduced. It is an indirect reduction and prohibited u/s 12 of the EPF Act,1952.
(3) Since the MW fixed by the Govt under the MW Act,1948 includes V.D.A linked to Cost of Living Index, you have to be constantly vigilant and ensure that your industry wages do not fall short of the minimum wages due to the periodic hike in V.D.A.
(4) Since the deletion of the component of D.A from the salary structure would reduce bonus and gratuity of the employees, certainly they will oppose such a change.
Therefore, in my opinion, it is not advisable.
From India, Salem
6018I am not sure about the actual intention behind the Auditor's so called suggestion to remove the existing component of D.A from the salary structure of the employees in your industrial establishment which falls under the State's S&E Act as well as other allied laws viz., ID Act,1947, MW Act,1948, PB Act,1965 and PG Act,1972 in addition to the ESI and EPF Acts. It may be out of his interest in minimizing the indirect financial commitment of his client towards bonus, gratuity, subscription to EPF etc. But I am constrained to state that the Auditor might have glossed over the negative legal implications of such a sudden change. They are:-
(1) You can not do away with the existing component of D.A without issuing a notice u/s 9-A of the ID Act,1947 as it amounts to a change in service conditions stipulated at serial nos.2 and 3 of Schedule IV of the Act.
(2)Removal of D.A may result in proportionate addition to other components so that the amount of contribution to EPFS get reduced. It is an indirect reduction and prohibited u/s 12 of the EPF Act,1952.
(3) Since the MW fixed by the Govt under the MW Act,1948 includes V.D.A linked to Cost of Living Index, you have to be constantly vigilant and ensure that your industry wages do not fall short of the minimum wages due to the periodic hike in V.D.A.
(4) Since the deletion of the component of D.A from the salary structure would reduce bonus and gratuity of the employees, certainly they will oppose such a change.
Therefore, in my opinion, it is not advisable.
From India, Salem
Dear Mr Uma,
The auditor should have been aware of the rule position before passing such a remark.
Instead of DA, probably they need to change their auditor??
His suggestion would create legal issues and labour issues.
From India, Pune
The auditor should have been aware of the rule position before passing such a remark.
Instead of DA, probably they need to change their auditor??
His suggestion would create legal issues and labour issues.
From India, Pune
@ Mr. Nath Rao Sir & Mr. Umakanthan Sir,I always appreciate your comments on the post.As this one seems to be absurd on auditors part to give such foolish advise. There is Lot more to learn here and contribute towards Better HR Practices.We Know DA is a variable allowance which is announced by government from time to time to compensate the cost of living. Our other benefits like PF,ESIC,BONUS, GRATUITY etc are also dependent on the value of DA as well. Then How can auditor say to remove this component.
Companies should see that employees are given their rights, privileges and entitlements properly, If we want them to sustain and perform at their peak.
Thank You Sir.
From India, Vadodara
Companies should see that employees are given their rights, privileges and entitlements properly, If we want them to sustain and perform at their peak.
Thank You Sir.
From India, Vadodara
Dear HR colleague,
While I fully agree with my learned colleagues, I would like to share a point of view.
Before I come to that, is your D.A linked to CLI or flat amount?. I presume it is flat amount and perhaps the Auditor is suggesting to merge it in the basic.
I also assume that your total wages are well above applicable minimum wages which fully covers future increases in VDA under Min.Wages.
The reason why the Auditor is perhaps suggesting to merge DA in basic is to arrest future consequential wage cost on account of Bonus, Gratuity , leave encashment etc . generally occurs, due to rise in VDA.
As long as current wages are kept at levels well above minimum wage law by not depriving workman of time to time raises in VDA, I do not see anything wrong in making this change by adhering to notice of change requirements under the ID Act and proactively taking care of other labour implications if any.
Regards
Vinayak Nagarkar
HR-Consultant
From India, Mumbai
While I fully agree with my learned colleagues, I would like to share a point of view.
Before I come to that, is your D.A linked to CLI or flat amount?. I presume it is flat amount and perhaps the Auditor is suggesting to merge it in the basic.
I also assume that your total wages are well above applicable minimum wages which fully covers future increases in VDA under Min.Wages.
The reason why the Auditor is perhaps suggesting to merge DA in basic is to arrest future consequential wage cost on account of Bonus, Gratuity , leave encashment etc . generally occurs, due to rise in VDA.
As long as current wages are kept at levels well above minimum wage law by not depriving workman of time to time raises in VDA, I do not see anything wrong in making this change by adhering to notice of change requirements under the ID Act and proactively taking care of other labour implications if any.
Regards
Vinayak Nagarkar
HR-Consultant
From India, Mumbai
@ Mr. Vinayak Nagarkarji,Your Point is taken, but if you read the Query it is not so very clear .It is always that Basic and DA is mentioned or minimum wages mentioned towards calculation of statutory compliance.As you said wages being kept well above minimum wages.therefore it is to arrest future consequential wage cost on Bonus Gratuity etc.
Sir My say is if the standard practice is followed right from beginning,then the question wont Arise at all.
From India, Vadodara
Sir My say is if the standard practice is followed right from beginning,then the question wont Arise at all.
From India, Vadodara
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Maharashtra DA,Special allowance July 14 to Dec 14 - Notification.pd f
TA DA Rules.doc