On 1 April 2006, the 7th Pay Commission came into effect. This was approved recently by the Central Cabinet which is chaired by the Prime Minister of India. The policies of the 7th Pay Commission directly impact central government employees, numbering more than 1 crore now. This includes 53 lakh pensioners and 47 lakh employees. So, if you are currently an employee or a pensioner, it is important to know more about the 7th Pay Commission and how it impacts your salary, arrears, pension, etc.

Here are 15 points you need to know about the 7th Pay Commission:

  1. Pay matrix: The Commission had recommended a new Pay Matrix which has now been approved. The old Pay Bands and Grade Pay system have been discontinued. The grade pay, which was the determining factor for the employee’s status, has now been replaced by the Pay Matrix and the employee’s level in it. Defence personnel, civilians, and the Military Nursing Service will now have separate pay matrices. The rationale and principle behind the pay matrices have remained unchanged.
  2. Increase in minimum pay: The minimum pay, which was earlier Rs.7,000, has now been increased to Rs.18,000. For a fresh recruit at the lowest level, the starting salary would be Rs.18,000 while for a newly recruited Class I officer it would be Rs.56,100. This means that a Class I officer who is directly recruited would receive a pay that is three times that of an entrant at the lowest level, reflecting a 1:3:12 compression ratio.
  3. Increment: The rate of increment continues to be 3%. This will result in a higher basic pay owing to the annual future increments being 2.57 times of the current increments being received.
  4. Fitment factor: A fitment factor of 2.57, for revision of pension and pay, will be applied across all the Pay Matrix levels.
  5. New levels: New levels have not been introduced and old levels have not been disbanded. The existing levels have all been included within the new structure. The rationalization behind the minimum pay for every level in the Pay Matrix has been approved. This takes into account the responsibility, accountability, and increasing roles in each step of the hierarchy.
  6. Defence Pay Matrix: The Defence Pay Matrix has been improved in the following ways: The Index of Rationalisation for Level 13A (Brigadier) has been enhanced; additional stages to be added in the following levels – Lieutenant Colonel (Level 12A), Colonel (Level 13), and Brigadier (Level 13A). This is to bring parity at the maximum of the respective levels with the counterparts at the Central Armed Police Forces (CAPF).
  7. CAPF and defence personnel: Some other changes that will impact employees including that of the CAPF and Defence personnel are the following:

  • Sick leave, special disability leave, and hospital leave are now part of Work Related Illness and Injury Leave (WRIIL). During the period of hospitalization, employees will receive full pay as well as allowances.
  • The ceiling for gratuity has increased to Rs.20 lakh from Rs.10 lakh. When DA rises by 50%, the gratuity ceiling will rise by 25%.
  • For different categories of personnel in the defence forces, the military service pay rates have been revised to Rs.3600, Rs.5200, Rs.10800, and Rs.15500 whereas earlier it was Rs.1000, Rs.2000, Rs.4200, and Rs.6000.
  • For defence forces personnel and civilians, the lump-sum compensation that is ex-gratia and payable to next of kin now comes under a common regime. For various categories, the existing rates have increased to Rs.25 to Rs.45 lakh from Rs.10 to Rs.20 lakh.
  • Short Service Commissioned Officers can exit the Armed Forces between 7 and 10 years of service and will receive a terminal gratuity that is the same as reckonable emoluments of 10.5 months.
  1. Pension: The Commission’s recommendations on pension and related benefits have been approved by the Cabinet. Both options for pension revision recommendations are subject to feasibility of their implementation.
  2. Pension revision: The revision of pension based on the 2.57 fitment factor using the second option will be immediately implemented.
  3. HBA: The House Building Advance ceiling has been increased to Rs.25 lakh from Rs.7.50 lakh. Four of the interest-free advances have been retained, which are TA for family of deceased employees, TA on tour or transfer, LTC, and Advances for Medical Treatment. The other interest-free advances have been discontinued.
  4. CGEGIS: The steep hike in the monthly contribution towards the Central Government Employees Group Insurance Scheme (CGEGIS) which was earlier recommended by the Commission has not been approved by the Cabinet. The take-home salary of lower-level employees will increase by Rs.1470 because of this. However, in order to continue to ensure social security, the Ministry of Finance has been tasked to formulate a group insurance scheme which will have a high-risk cover with a low premium.
  5. NPS: Two separate committees will be constituted to 1) examine differences that may arise from the implementation of the report and 2) suggest measures to streamline the National Pension Scheme (NPS) implementation.
  6. Allowances: After examining 196 existing allowances, 51 Allowances were recommended to be abolished and 37 allowances to be subsumed. Till a final decision is made to examine the implications of these changes, the existing Allowances will continue being paid at the current rates.
  7. Unresolved issues: For issues in which the Commission could not arrive at a consensus and for administrative, cadre-specific issues, each Ministry will examine the issues.
  8. Financial impact: The additional financial impact on the implementation of recommendations will be Rs.1,02,100 crore in 2016-17. The payment of arrears for pension and pay for the year 2015-2016 for a two-month duration will be Rs.12,133 crore.

Knowing these changes will help employees plan and manage their finances in a much better way.


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