Seventh Pay Commission recommends 16% pay hike

The Seventh Pay Commission has recommended a 16 per cent increase in salaries of central government employees, with a minimum pay of Rs18,000 per month and a maximum pay of Rs2,25,000 per month for apex scale and Rs2,50,000 per month for cabinet secretary and others presently at the same pay level.

The overall increase in pay and allowances and pensions over the 'business as usual' scenario will be 23.55 per cent, considering the increase in basic pay of 16 per cent, increase in allowances of 63 per cent, and increase in pension of 24 per cent.

The Seventh Pay Commission headed by Justice A K Mathur submitted its report to finance minister Arun Jaitley today. The recommendations for a 16 per cent hike in the pay will benefit 5 million central government employees.

Recommendations of the Seventh Pay Commission will now go to the cabinet and are likely to be implemented with effect from 1 January 2016.

Government employees had received a 35 per cent hike on implementation of the Sixth Pay Commission in 2008.

Highlights of Recommendations of Seventh Central Pay Commission:

• Based on the Aykroyd formula, the minimum pay in government is recommended to be set at Rs18,000 per month.
• Maximum pay has been set at Rs2,25,000 per month for Apex Scale and Rs2,50,000 per month for Cabinet Secretary and others presently at the same pay level.
• The total financial impact of implementation of the recommendations in the FY2016-17 is likely to be Rs1,02,100 crore. Of this, the increase in pay would be Rs39,100 crore, increase in allowances would be Rs29,300 crore and increase in pension would be Rs33,700 crore.
• Out of the total financial impact of Rs1,02,100 crore, Rs73,650 crore will be borne by the General Budget and Rs28,450 crore by the Railway Budget.
• The overall increase in pay and allowances and pensions over the 'Business As Usual' scenario will be 23.55 per cent, which includes the increase in basic pay of 16 per cent, increase in allowances of 63 per cent, and increase in pension at 24 per cent.

Considering the issues raised regarding the grade pay structure and with a view to bring in greater transparency, the present system of pay bands and grade pay has been dispensed with and a new pay matrix has been designed. Grade Pay has been subsumed in the pay matrix. The status of the employee, hitherto determined by grade pay, will now be determined by the level in the pay matrix.

A fitment factor of 2.57 is being proposed to be applied uniformly for all employees.

The rate of annual increment is being retained at 3 per cent.

The commission has recommended a Modified Assured Career Progression (MACP) which makes performance benchmarks more stringent from ''Good'' to ''Very Good''.

The commission has also proposed that annual increments not be granted in the case of those employees who are not able to meet the benchmark either for MACP or for a regular promotion in the first 20 years of their service. No other changes in MACP recommended.

Military Service Pay
Military service pay, which is a compensation for the various aspects of military service, will be admissible to the defence forces personnel only. As before, military service pay will be payable to all ranks up to and inclusive of brigadiers and their equivalents.

Short Service Commissioned Officers will be allowed to exit the armed forces at any point in time between 7 and 10 years of service, with a terminal gratuity equivalent of 10.5 months of reckonable emoluments. They will further be entitled to a fully funded one year Executive Programme or a M.Tech. programme at a premier institute.

The commission has recommended a revised formulation for lateral entry/resettlement of defence forces personnel which keeps in view the specific requirements of organisation to which such personnel will be absorbed. For lateral entry into CAPFs an attractive severance package has been recommended.

Parity between field and headquarters staff recommended for similar functionaries, eg, assistants and stenos, besides systemic change in the process of cadre review for Group A officers.

The commission has recommended abolishing 52 allowances altogether. Another 36 allowances have been abolished as separate identities, but subsumed either in an existing allowance or in newly proposed allowances. Allowances relating to risk and hardship will be governed by the proposed Risk and Hardship Matrix.

Allowances relating to risk and hardship will be governed by the newly proposed nine-cell Risk and Hardship Matrix, with one extra cell at the top, viz, RH-Max to include Siachen Allowance.

This would be the ceiling for risk/hardship allowances and there would be no individual RHA with an amount higher than this allowance.

Since the basic pay has been revised upwards, the commission recommends that HRA be paid at the rate of 24 per cent, 16 per cent and 8 per cent of the new basic pay for Class X, Y and Z cities respectively. The commission also recommends that the rate of HRA will be revised to 27 per cent, 18 per cent and 9 per cent, respectively, when DA crosses 50 per cent, and further revised to 30 per cent, 20 per cent and 10 per cent when DA crosses 100 per cent.

In the case of PBORs of defence, CAPFs and Indian Coast Guard compensation for housing is presently limited to the authorised married establishment hence many users are being deprived. The HRA coverage has now been expanded to cover all.

Any allowance not mentioned in the report shall cease to exist.

Emphasis has been placed on simplifying the process of claiming allowances.

All non-interest bearing advances have been abolished.

Regarding interest-bearing advances, only personal computer advance and house building advance (HBA) have been retained. HBA ceiling has been increased to Rs25 lakh from the present Rs7.5 lakh.

The rates of contribution as also the insurance coverage under the Central Government Employees Group Insurance Scheme (CGEGIS) have remained unchanged for long. They have now been enhanced suitably

The commission has recommended introduction of a Health Insurance Scheme for central government employees and pensioners.

Meanwhile, for the benefit of pensioners residing outside the CGHS areas, CGHS should empanel those hospitals which are already empanelled under CS (MA)/ECHS for catering to the medical requirement of these pensioners on a cashless basis.

All postal pensioners should be covered under CGHS. All postal dispensaries should be merged with CGHS.

The commission recommends a revised pension formula for civil employees, including CAPF personnel as well as for defence personnel, who retire before 1 January 2016. This formula will bring about parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.

The past pensioners will first be fixed in the pay matrix being recommended by the commission on the basis of pay band and grade pay at which they retired, at the minimum of the corresponding level in the pay matrix.

This amount will be raised to arrive at the notional pay of retirees, by adding number of increments he/she had earned in that level while in service at the rate of 3 per cent.

In the case of defence forces personnel this amount will include military service pay as admissible.

Fifty per cent of the total amount so arrived at shall be the new pension.

An alternative calculation will be carried out, which will be a multiple of 2.57 times of the current basic pension. The pensioner will get the higher of the two.

The commission has recommended enhancement in the ceiling of gratuity from the existing Rs10 lakh to Rs20 lakh. The ceiling on gratuity may be raised by 25 per cent whenever DA rises by 50 per cent.

The commission has recommended reverting to a slab based system for disability element, instead of existing percentile based disability pension regime.

It has also recommended revision of rates of lump sum compensation for next of kin (NOK) in case of death arising in various circumstances relating to performance of duties, to be applied uniformly for the defence forces personnel and civilians including CAPF personnel.

The commission is of the view that in case of death in the line of duty, the force personnel of CAPFs should be accorded martyr status, at par with the defence forces personnel.

The commission has recommended a number of steps to improve the functioning of NPS. It has also recommended establishment of a strong grievance redressal mechanism.

The commission has recommended a consolidated pay package of Rs4,50,000 and Rs4,00,000 per month for chairpersons and members respectively of select regulatory bodies. In case of retired government servants, their pension will not be deducted from their consolidated pay. The consolidated pay package will be raised by 25 per cent as and when dearness allowance goes up by 50 per cent. For members of the remaining regulatory bodies normal replacement pay has been recommended.

The commission has recommended introduction of the Performance Related Pay (PRP) for all categories of central government employees, based on quality Results Framework Documents, reformed Annual Performance Appraisal Reports and some other broad guidelines. It has also recommended that the PRP should subsume the existing bonus schemes.

Economists expect the wage hikes to boost consumption-driven recovery in the domestic economy. Sales of affordable homes and consumer durables such as cars, two-wheelers and other electronic items are likely to pick up, analysts say.

On the flip side, salary hikes are also expected to stoke inflation and fiscal pressures, economists say.

The central government constitutes the pay commission every 10 years to revise the pay scale of its employees and often these are adopted by states after some modifications.