How to calculate DA for Private Employees As per Consumer Price Index ? Please help .
From India, Thiruvananthapuram
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From India, Thiruvananthapuram
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During the pay revision for government employees and PSU employees, the existing Dearness Allowance (DA) is merged into the basic pay, and the DA on the start date of the pay revision is treated as zero. So, the Consumer Price Index (CPI) on the date of revision is taken as nil point. Thereafter, for every 1% increase in the CPI point on that date, the DA will increase by 1% of the basic pay.
For instance, let us assume the CPI as of 01.12.17 to be 100, and for every 10-point increase in CPI, the DA of the employees will enhance by 1% of the basic pay. Here, you can opt for a simple solution by keeping the existing DA as fixed, and for every 1% increase in CPI, allow a variable DA of 1% increase in basic pay and in proportion thereof.
The rate of neutralization could also vary; in the government sector, it is 100% (i.e., 1% each), but it varies in other sectors. You can choose a convenient formula depending on your capacity to pay.
In case you have any specific queries, you may respond.
From India, Mumbai
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1655For instance, let us assume the CPI as of 01.12.17 to be 100, and for every 10-point increase in CPI, the DA of the employees will enhance by 1% of the basic pay. Here, you can opt for a simple solution by keeping the existing DA as fixed, and for every 1% increase in CPI, allow a variable DA of 1% increase in basic pay and in proportion thereof.
The rate of neutralization could also vary; in the government sector, it is 100% (i.e., 1% each), but it varies in other sectors. You can choose a convenient formula depending on your capacity to pay.
In case you have any specific queries, you may respond.
From India, Mumbai
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Dear colleague,
Firstly, please explain the necessity of introducing DA in your organization. Companies in the private sector that have dual linkage, i.e., both to basic salary slabs and CPI, have been witnessing disproportionate growth in the DA component and distortion in the wage structure. If you do not have a compelling reason, reconsider implementing it.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Firstly, please explain the necessity of introducing DA in your organization. Companies in the private sector that have dual linkage, i.e., both to basic salary slabs and CPI, have been witnessing disproportionate growth in the DA component and distortion in the wage structure. If you do not have a compelling reason, reconsider implementing it.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Dear Fernand, are you planning to give Fixed DA ? in addition to Minimum Wages which comprises of Basic Salary+VDA
From India, New Delhi
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From India, New Delhi
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Dear Friend,
Your query on DA for private employees is not understood. There are still organizations that follow the VDA component to counter price rise, where DA is given. However, if you want to increase wages to keep up with the price rise, you need to monitor the CPI every month and observe the percentage variation. Simply calculate the mean percentage between the price index and set a price per point increase or decrease. Based on that, you can make additions if it has increased.
From India, Mumbai
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Your query on DA for private employees is not understood. There are still organizations that follow the VDA component to counter price rise, where DA is given. However, if you want to increase wages to keep up with the price rise, you need to monitor the CPI every month and observe the percentage variation. Simply calculate the mean percentage between the price index and set a price per point increase or decrease. Based on that, you can make additions if it has increased.
From India, Mumbai
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Dear colleague,
I want to share a general concern which I have observed earlier and now as well, that the querists do not provide essential/relevant information in their queries. This results in giving views based on assumptions and can sometimes be misleading.
Regarding the question about DA, whether it is academic or arising from a practical issue has not been stated. It would be helpful if information is provided on the industry, such as manufacturing or commercial, whether it is unionized, and other relevant details so that members can provide value-added responses.
I have already mentioned that the DA component for unionized workers and staff in many well-established companies has risen uncontrollably high, distorting the wage structure and creating anomalies, such as workers receiving higher salaries than supervisors and reducing salary differentials to unfair levels.
Despite the above, if there is a compulsion (due to union demands) to introduce DA, the following points may be kept in mind:
1. DA is paid to protect basic wages (purchasing power) against the price rise of essential commodities. DA was first introduced during the Second World War for good reasons. However, over time, due to union demands/pressure, it has seen unprecedented growth, and all the principles of DA fixation in the organized sector have been disregarded by adopting various formulas during each successive wage agreement to maintain peace.
From India, Mumbai
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I want to share a general concern which I have observed earlier and now as well, that the querists do not provide essential/relevant information in their queries. This results in giving views based on assumptions and can sometimes be misleading.
Regarding the question about DA, whether it is academic or arising from a practical issue has not been stated. It would be helpful if information is provided on the industry, such as manufacturing or commercial, whether it is unionized, and other relevant details so that members can provide value-added responses.
I have already mentioned that the DA component for unionized workers and staff in many well-established companies has risen uncontrollably high, distorting the wage structure and creating anomalies, such as workers receiving higher salaries than supervisors and reducing salary differentials to unfair levels.
Despite the above, if there is a compulsion (due to union demands) to introduce DA, the following points may be kept in mind:
1. DA is paid to protect basic wages (purchasing power) against the price rise of essential commodities. DA was first introduced during the Second World War for good reasons. However, over time, due to union demands/pressure, it has seen unprecedented growth, and all the principles of DA fixation in the organized sector have been disregarded by adopting various formulas during each successive wage agreement to maintain peace.
From India, Mumbai
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In designing the Fresh DA formula, one faces a lot of controversies and widely differing views right from the selection of the CPI series, base rate of neutralization, variable DA rate, whether to link it only to CPI or also to different slabs of basic salary, and ceiling on DA, etc. on which consensus becomes difficult, particularly when negotiating with the union.
By the very concept, DA is to protect basic wages from erosion due to price rise. It cannot be linked to productivity gains and only leads to an automatic rise in wage cost.
Therefore, if possible, have consolidated salary scales (meaning salary is inclusive of DA) and other allowances as per industry cum region basis.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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By the very concept, DA is to protect basic wages from erosion due to price rise. It cannot be linked to productivity gains and only leads to an automatic rise in wage cost.
Therefore, if possible, have consolidated salary scales (meaning salary is inclusive of DA) and other allowances as per industry cum region basis.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Increase in DA of Central Govt employees from 1.7.2012.pdf