Notification of variable dearness allowance for shops and commercial establishments in Maharashtra

As mentioned in our previous update, the Industries, Energy and Labour Department of Maharashtra (Maharashtra Labour Department) revised the basic rate of wages prescribed for employment in shops and commercial establishments in Maharashtra (S&E), by nearly twice the amount previously prescribed.

The minimum rate of wages payable to employees engaged in S&E consists of basic rate of wages along with cost of living allowance / variable dearness allowance (VDA) notified by the State Government from time to time. As per the notification dated 4 February 2019 issued by office of the Labour Commissioner – Maharashtra (Labour Commissioner), VDA prescribed for employees engaged in S&E was INR 4,104 per month, which was applicable from 1 January 2019 to 30 June 2019.

The Labour Commissioner vide notification dated 5 August 2019 (Notification) revised VDA for employees engaged in S&E. As per the Notification, VDA prescribed for the period 1 July 2019 to 23 July 2019 shall be INR 4,482, and from 24 July 2019 to 31 December 2019, VDA shall be INR 390 per month.

Comment

While the revision of basic rate of wages was lauded by employees and trade unions as a much needed and favorable move, the Notification, has to a certain extent nullified the effect of revision of basic rate of wages.

For instance, the increase in minimum rate of wages for a skilled employee in S&E in Zone I is as follows:

*(payable at the rate of 5% of the wages (i.e. basic salary along with dearness allowance))

In effect, the difference between the revised and previously payable minimum wages along with house rent allowance, to a skilled person employed in S&E in Zone I of is only INR 2,214.

While employees would have expected a significant increase in their gross wages owing to the revision of basic rate of wages, the drastic reduction in VDA is a disappointing move, against the interests of the employees. On the other hand, employers now get a breather as the expected increase in financial burden has significantly reduced owing to reduction of VDA.

• Anshul Prakash (Partner), Abhimanyu Pal (Senior Associate) and Kruthi N Murthy (Associate)

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