Introduction to DA (Dearness Allowance)
All the public sector employers pay salaries to their employees. Most salary components are calculated in terms of the basic salary and are then added to it to calculate the take-home amount. One such critical component is Dearness Allowance or DA.
Understanding DA
To offset the impact of inflation, the Government pays a dearness allowance to employees and pensioners. The adequate salary of government employees needs constant enhancement to help them cope with the increasing prices.
Despite various measures taken to control inflation, only partial success has been achieved as prices move according to the market. It becomes essential for the Government to protect its employees from the adverse effects of inflation.
As the impact of inflation changes according to the employee's location, the dearness allowance is calculated accordingly. DA varies from employee to employee depending on their presence in any sector.
Types Of Dearness Allowance
For calculation, DA is classified into two categories
Industrial Dearness Allowance (IDA) concerns the Public sector employees of the Central Government. The Industrial Dearness Allowance for the public sector employees experiences quarterly revision depending on the Consumer Price Index to help offset the effect of rising inflation levels.
Variable Dearness Allowance (VDA) concerns the employees of the Central Government. According to the Consumer Price Index, it is revised every six months to help offset the impact of rising inflation levels. VDA in itself is dependant on three different components, as given below.
Base Index – remains fixed for a particular period. Consumer Price Index – impacts VDA as it changes every month. Variable DA amount that the Government has set remains fixed unless the Government revises the basic minimum wages.
