7th Pay Commission Highlights – 23.55% hike in Salary

Justice AK Mathur who leads the Seventh Pay Commission, has submitted the report to the Central government today. It has recommended a hike of 16 % in salary, along with that of 63% in allowances and 24% in case of pensions.

An overall hike of 23.5% has been given to the employees and pensioners of the central government. In comparison with that of 35% by the 6th Pay Commission, the current hike has been poor.

Some of the recommendations from the 7th Pay Commission are listed as follows:

• The 7th Pay Commission is to be implemented on 1 January 2016. The commission has set the minimum pay at Rs 18,000, while the maximum has been set at Rs 2.25 lakh. The emolument of the cabinet’s secretary has been set at Rs 2.5 lakh per month, which is much higher than the current band of Rs 90000 per month.
• A rate of 3% has been retained as that of annual increment.
• As many as 47 lakh serving employees of the Central government and 54 lakh pensioners would be influenced by the recommendations of the seventh pay commission.
• The Commission has doubled the gratuity to Rs 20 lakh, while it has abolished 52 allowances and submerged 36 more.
• It has done away with the current pay band and grade pay system and replaced it with has replaced it with a new pay matrix. The status of the employee which was earlier determined on the basis of grade pay, will now be decided on the basis of pay matrix level. There will be separate pay matrices for civilians, military nursing employees and defense personnel. The new structure continues with the existing levels as there is not an introduction of new levels, neither has the commission dispensed any level.

• A Defence Pay Matrix has been drawn up, which resembles that for civilian employees. In case of combatants, the matrix corresponds to the existing GP 2000, the induction level for sepoys and equivalent. Military service Pay will be allowed for defense personnel only. For service officers, it would be more than double now, raised from Rs 6000 to Rs 15000, while that for nursing officers, it would be hiked from Rs 4200 to Rs 10800. It would rise from Rs 2000 to Rs 5200 for JCO/ORs and Rs 1000 to Rs 3600 for non combatants.
• The pension for each defence personnel would be the same, regardless of the timing of their retirement. It has not been clarified whether this has reiterated OROP or not.
• Currently, the Indian Administrative Service is getting two additional increments, which comes at the rate of 3% over the basic pay at three stages of promotion, namely the Senior Time Scale (STS), the Junior Administrative Grade (JAG) and the NFSG. This is going to continue in the proposed pay matrix too.

It has been told that the recommendations have been made taking into consideration the fiscal math. The hike would cause a 0.65% impact on GDP, as compared to that of 0.77% of GDP by that of the 6th Pay Commission. After having accepted the report of the Commission, Finance minister Arun Jaitley stated that the implementation of its recommendations in the first year would lead to an additional expenditure of Rs 70,000 crore by the exchequer.

This would result in a financial impact of Rs 1.02 lakh crore in FY1. Out of this, Rs 39,100 crore would be for hike in salary, Rs 29,300 crore for allowances and Rs 33,700 crore for pension. Of the monetary impact of Rs 1.02 lakh crore, Rs 74,000 crore would be attributed to the additional Union Budget cost while Rs 28,000 crore would go for Railway Budget.

It has not been clarified whether the fiscal impact would be seen in FY16, wholly or partially. The Finance Minister further stated that the pay hike would be implemented within a period of five months to the maximum.