SEVENTH Pay Commission

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Let us start with a formal definition of what are Pay Commissions: Pay Commissions are multi-member bodies intermittently set up by the Government of India after every 10 years, to assess the pay scale of all government employees and give its report on the various changes that need to be incorporated in the salary structure. Since India’s independence, seven pay commissions have been set up on a regular basis to review and make recommendations on the work and pay structure of all civil and military divisions of Government of India. Headquartered in Delhi, the commission is usually given 18 months to make its recommendation to the finance minister, however the time period can be extended by the government.

Here is a table with details of all the pay commissions that have been set up till date:

Central Pay Commission Number  

Established

 

Report submitted

 

Chairman

First CPC May, 1946 May, 1947 Srinivas Varadachariar
Second CPC August, 1957 August, 1959 Jagannath Dash
Third CPC April, 1970 March,1973 Raghubir Dayal
Fourth CPC June, 1983 Three reports submitted in : June, 1986; December, 1986 and May, 1987 PN Singhal
Fifth CPC April, 1994 January, 1997 Justice S Ratnavel
Sixth CPC October, 2006 March, 2008 Justice B.N Srikrishna
Seventh CPC February, 2014 19.11.2015 Justice A.K Mathur

As pay commissions are the only bodies that fix an employee’s pay for the next ten years, they are considered to be very powerful. Revision of Dearness Allowance (DA) though takes place on a regular basis but that is mostly to compensate for inflation as per the Consumer Price Index. Before starting with the recommendations of the seventh pay commission, let’s go through the components of a government employee’s salary:

  1. Basic Pay – The basic pay that you are entitled to as an employee
  2. 3% annual increase which has been kept same by the 7th pay commission also
  3. Dearness Allowance – An allowance given by the government to its employees to compensate for their cost of living
  4. House Rent Allowance – Allowance to compensate for the rent of the house in which any employee stays, depending on the city of habitation. HRA given to an employee is either of 8%, 16% or 24% of an employee’s gross salary. (from 01.01.2016)
  5. Travel Allowance – Allowance paid by the government to compensate for the employee’s travelling cost. So, if you are a Group D employee and are drawing a salary in the pay band 5200-20200, then the maximum TA that you, as an employee are entitled to was 300, which has now been increased to 900 by the seventh pay commission. However, this too depends on the city of habitation. For the same pay band and grade pay, the ones residing in A1/A cities were entitled to an allowance of 600 which has now been increased to 1350.
  6. City Compensatory Allowance – This type of allowance is offered by the government to its employees to compensate for the high cost of living in metropolis and large cities. (Not applicable to all)

Well, these are the basic components of a government pay slip. Another important aspect is the grade pay and pay band concept, which was introduced by the sixth pay commission.

Salary structure until December 2015, looked like this 9300-3%-34800

9300 here is the basic pay that an employee is entitled to at a particular post. 3% is the annual rate of revision of the basic pay. 34800 is the maximum pay that a person is entitled to while holding the same post. For this pay band, a grade pay of say 4200 was given (grade pay can vary for two people of the same pay band depending on the class/category of employee).  Allowances were calculated on the sum of basic pay and grade pay which in this case is 9300+4200 = 13500.

So, total salary was:  (Basic Pay + Grade Pay) + DA+ HRA+ Other allowances

Considering DA to be 110%, HRA = 20% (depends on the city of habitation) and miscellaneous allowances = 40%

Total salary for an employee as per the sixth pay commission worked out to be = Rs. 36450/-

This was entitled to an annual revision of 3%, so, basic pay goes up by 3% every year and DA revision too takes place regularly. Also, the base of calculation of allowances will now be the revised pay.

9300+ (3% of 9300) = (9579 + GP of 4200) +DA+ HRA+MA would be the salary in second year of service. (Allowance base will now be 9579+4200 = 13779/-)

Let us now discuss the seventh pay commission.

The seventh pay commission was set up by the Government of India in February 2014 and was headed by Justice A.K Mathur. The commission was given 18 months to submit its report and had set up its own officers, advisers, experts and institutional consultants and called for required information from various ministries and departments of the Government of India. The report was submitted to the finance minister by Justice Mathur on 19th November, 2015. All the recommendations were accepted by the government and came into effect from 01.01.2016.

The recommendations were:

  1. It retained the annual rate of revision at 3%.
  2. Minimum salary that can be drawn by an employee has been increased to 18000 per month and maximum to 2.25 lakhs. However, the cabinet secretary will draw a fixed salary 2.5 lakhs.
  3. Military service pay has been increased to 16500/- per month.
  4. It abolished the pay band and grade pay that was introduced by the sixth pay commission and has come up with a new concept of pay matrix.

So, earlier if a person was drawing 9300 as the basic pay with a grade pay of 4200, then total would be 13500. The fitment factor for this band is given to be 2.62 (refer to the table below), thus, as per the matrix, new pay = 13500*2.62 = 35,370/- (=35400/-) + allowances.

[Please note that the pay matrix talked about is only for civilian employees a separate matrix has been released by the commission for military and defence personnel.]

  1. A new term that came up is fitment factor. Fitment factor is the multiplication factor by which the pay will increase. If a person was drawing a basic pay of 15600 with a grade pay of 5400, then total was 21000. The fitment factor for this group is 2.67, so increased salary will be 56,070/-
  2. This means a total of hike of 16% in basic pay and almost 23.55% in pay and allowances altogether.
  3. As per the recommendations, pensions have also increased by 24%.
  4. The commission has also abolished 52 allowances and submerged 36 others.

There are certain important points with respect to Pay Commissions that should be kept in mind:

  1. The recommendations of the Central Pay Commission will benefit the central government employees only. This does not include bank employees, PSU employees (like ONGC, IGCL etc.) or partially government owned companies.
  2. States can pass on the benefits to their employees only after receiving suitable recommendations from the state pay commission.
  3. The Central Pay Commission includes: Railway employees, Defence personnel, Paramilitary forces and other central government department employees.
  4. The recommendations of the seventh pay commission are expected to affect 47 lakh employees and 52 lakh pensioners. These will also have an impact of Rs.74000 crores on the Union Budget and Rs.28000 crores on Railway Budget.

Now, for those of you who did not understand the calculations of moving from grade pay to pay matrix, a condensed table of the same is given below:

table

 

 
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