In order to keep you one step forward and to boost your General Knowledge and confidence level, here we are presenting you an important topic “Spotlight on 7th Pay Commission” in our Spark Plug series. This will surely help you in your exam preparation.
Pay Commission is set up on regular basis by Government of India, and gives its recommendations regarding changes in salary structure of its employees. 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 strcture of all civil and military divisions of the Government of India.
Headquartered in Delhi, the Commission is given 18 months from date of its constitution to make its recommendations.
India's first pay commission
The first pay commission was established on January , 1946 and its submitted its report on May, 1947 to the interim government of India. It was under the chairmanship of Srinivasa Varadachariar.
Spotlight on 7th Pay Commission
On September 25, 2013 the finance minister P Chidambaram announced that the Prime Minister Manmohan Singh has approved the constitution of the 7th Pay Commission. Its recommendations are to be implemented with effect from January 1, 2016.
Justice A.K Mathur headed the Seventh Pay Commission, announcement of which was done on 4 February 2014.
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the implementation of the recommendations of 7th Central Pay Commission (CPC) on pay and pensionary benefits. It will come into effect from 01.01.2016.
1. The minimum pay has been increased from Rs. 7000 to 18000 p.m. Starting salary of a newly recruited employee at lowest level will now be Rs. 18000 whereas for a freshly recruited Class I officer, it will be Rs. 56100. This reflects a compression ratio of 1:3.12 signifying that pay of a Class I officer on direct recruitment will be three times the pay of an entrant at lowest level.
2. For the purpose of revision of pay and pension, a fitment factor of 2.57 will be applied across all Levels in the Pay Matrices.
3. Rate of increment has been retained at 3 %. This will benefit the employees in future on account of higher basic pay as the annual increments that they earn in future will be 2.57 times than at present.
4. The government has cleared the pay (increase in expenditure by 16 per cent) and pension (increase in expenditure by 24 per cent) related recommendations that will cost Rs. 84,933 crore.
5. Minimum Pay: Based on the Aykroyd formula, the minimum pay in government is recommended to be set at ₹18,000 per month.
6. Maximum Pay: ₹2,25,000 per month for Apex Scale and ₹2,50,000 per month for Cabinet Secretary and others presently at the same pay level.
7. The total financial impact in the FY 2016-17 is likely to be ₹1,02,100 crore, over the expenditure as per the ‘Business As Usual’ scenario. Of this, the increase in pay would be ₹39,100 crore, increase in allowances would be ₹ 29,300 crore and increase in pension would be ₹33,700 crore.
8. Out of the total financial impact of ₹1,02,100 crore, ₹73,650 crore will be borne by the General Budget and ₹28,450 crore by the Railway Budget.
9. In percentage terms the overall increase in pay & allowances and pensions over the ‘Business As Usual’ scenario will be 23.55 percent. Within this, the increase in pay will be 16 percent, increase in allowances will be 63 percent, and increase in pension would be 24 percent.
10. The total impact of the Commission’s recommendations are expected to entail an increase of 0.65 percentage points in the ratio of expenditure on (Pay+Allowances+ Pension) to GDP compared to 0.77 percent in case of VI CPC.
11. Some other decisions impacting the employees including Defence & Combined Armed Police Forces (CAPF) personnel include :
- Gratuity ceiling enhanced from Rs. 10 to 20 lakh. The ceiling on gratuity will increase by 25 % whenever DA rises by 50 %.
- A common regime for payment of Ex-gratia lump sum compensation for civil and defence forces personnel payable to Next of Kin with the existing rates enhanced from Rs. 10-20 lakh to 25-45 lakh for different categories.
- Rates of Military Service Pay revised from Rs. 1000, 2000, 4200 & 6000 to 3600, 5200, 10800 & 15500 respectively for various categories of Defence Forces personnel.
- Terminal gratuity equivalent of 10.5 months of reckonable emoluments for Short Service Commissioned Officers who will be allowed to exit Armed Forces any time between 7 and 10 years of service.
- Hospital Leave, Special Disability Leave and Sick Leave subsumed into a composite new Leave named ‘Work Related Illness and Injury Leave’ (WRIIL). Full pay and allowances will be granted to all employees during the entire period of hospitalization on account of WRIIL.
12. The Cabinet also decided not to accept the steep hike in monthly contribution towards Central Government Employees Group Insurance Scheme (CGEGIS) recommended by the Commission. The existing rates of monthly contribution will continue. This will increase the take home salary of employees at lower levels by Rs. 1470.
13. The Commission examined a total of 196 existing Allowances and, by way of rationalization, recommended abolition of 51 Allowances and subsuming of 37 Allowances.
14. The Cabinet also decided to constitute two separate Committees (i) to suggest measures for streamlining the implementation of National Pension System (NPS) and (ii) to look into anomalies likely to arise out of implementation of the Commission’s Report.
15. As estimated by the 7th CPC, the additional financial impact on account of implementation of all its recommendations in 2016-17 will be Rs. 1,02,100 crore. There will be an additional implication of Rs. 12,133 crore on account of payments of arrears of pay and pension for two months of 2015-16.
16. The Cabinet approved the recommendation of the Commission to enhance the ceiling of House Building Advance from Rs. 7.50 lakh to 25 lakh. In order to ensure that no hardship is caused to employees, four interest free advances namely Advances for Medical Treatment, TA on tour/transfer, TA for family of deceased employees and LTC have been retained. All other interest free advances have been abolished.
17. The recommendations will benefit over 1 crore employees. This includes over 47 lakh central government employees and 53 lakh pensioners, of which 14 lakh employees and 18 lakh pensioners are from the defence forces.
Pension, Allowances & Pay spent as a proportion of GDP
Around 2.8 per cent of GDP will be spent on Pension, Allowances & Pay. Additional expenditure, that includes all recommendations, will lead to an increase in 0.65 per cent of GDP on Pension, Allowances & Pay.
Proportion of Union Budget spent on salaries and pensions
As of 2014-15, 7.8 per cent of total expenditure is spent on salaries and 4.6 per cent of total expenditure is spent on pensions.