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Changes to VDA Under Minimum Wages

Source | | Animay Singh

The Minimum Wages Act, 1948 is a social-welfare legislation that aims to regularize the payment of wages for certain classes of employments known under the Act as scheduled employments. The objective is to ensure that workers are not exploited by being forced to work for wages below the specified threshold set by either the Central or State Government. The ‘appropriate government’ under the Act fixes minimum wages by way of notification in the Official Gazette after consultation with the Committees/Subcommittees in charge.

Minimum wages are revised periodically based on the Consumer Price Index (CPI) and other relevant considerations in formulating a reasonable ‘living wage’ for workers. This is iterated under Section-3(1) of the Act which explains that the components of Minimum Wage are a basic rate of wages and a special allowance that may be adjusted periodically with variations in the cost-of-living allowance.

What is Variable Dearness Allowance (VDA)?

Variable DA is an allowance given to workers to account for inflationary trends for the price rise and is notified by the State government once in a year after capturing the price rise data over the previous year. Official Inflation Rate is calculated on the basis of the Consumer Price Index (CPI) which tracks the cost of living over a period of time. Inflation affects the purchasing power of an individual thereby allowing for an objective assessment of one’s salary, this is because an increase in salary coupled with a corresponding increase in inflation would effectively render that increase worthless. 

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