7th Pay Commission: Boon for Government Sector Employees

7th Pay Commission Pay Scale

7th Pay Commission – A boon for Government Sector Employees. Includes 7th Pay Commission recommendations.

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7th Pay Commission

7th Pay Commission is excellent news for government sector employees. Under the latest 7th pay commission provisions, the maximum monthly salary for a government sector employee will be Rs. 2.5 Lakhs. This is two times the highest salary that was given under the 6th Pay Commission i.e.Rs.90,000 per month.

7th Pay Commission: Recommendations

Below I will try to illustrate the recommendations of the 7th Pay Commission – point wise.

  • Recommended Date of implementation of 7th Pay Commission: 01.01.2016
  • Minimum Pay under 7th Pay Commission: Based on the Aykroyd formula, the minimum pay in government is recommended to be set at ₹18,000 per month.
  • Maximum Pay under 7th Pay Commission: ₹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.
  • Financial Implications of 7th Pay Commission:
  • a) As per experts, under the 7th Pay Commission, the total financial impact in the Financial year 2016-17 is likely to be Rs. 1,02,100 crore, over the expenditure. Of this, the increase in pay would be Rs. 39,100 crore, increase in allowances would be Rs. 29,300 crore and increase in pension would be Rs. 33,700 crore.
  • b) Out of the total financial impact of Rs. 1,02,100 crore, Rs. 73,650 crore will be borne by the General Budget and Rs.28,450 crore by the Railway Budget.
  • c) In percentage terms the overall increase in pay & allowances and pensions over the “Business As Usual‟ scenario will be 23.55 %. Within this, the increase in pay will be 16%, increase in allowances will be 63%, and increase in pension would be 24%.
  • d) 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%in case of VI CPC.
  • New Pay Structure under 7th Pay Commission: 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.
  • Fitment under 7th Pay Commission: A fitment factor of 2.57 is being proposed that can be applied uniformly to all.
  • Annual Increment under 7th Pay Commission: The rate of annual increment is being retained at 3% even under the 7th Pay Commission.
  • Modified Assured Career Progression (MACP):

a. Performance benchmarks for MACP have been made more stringent from “Good” to “Very Good”.

b. The 7th Pay Commission has also proposed that annual increments should not be granted in the case of those employees who are not being able to meet the benchmark either for MACP or for a regular promotion in the first 20 years of their service.

c. No other changes in MACP has been recommended.

  • Military Service Pay (MSP): The Military Service Pay, which is a compensation for the various aspects of military service, will be applicable to the Defence forces personnel only. Military Service Pay will be payable to all ranks up to and inclusive of Brigadiers and their equivalents.
  • Short Service Commissioned Officers: 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.
  • Lateral Entry/Settlement: The Commission is recommending a revised formulation
    for lateral entry/resettlement of defence forces personnel which keeps in view the
    specific requirements of organization to which such personnel will be absorbed. For
    lateral entry into CAPFs an attractive severance package has been recommended.
  • Headquarters/Field Parity: Parity between field and headquarters staff
    recommended for similar functionaries e.g Assistants and Stenos.
  • Cadre Review: Systemic change in the process of Cadre Review for Group A officers
  • Allowances: 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.
  • Advances:

a. All non-interest bearing Advances have been abolished under the provisions of the 7th Pay Commission.

b. Regarding interest-bearing Advances, only Personal Computer Advance and House Building Advance (HBA) have been retained as per 7th Pay Commission report.. HBA ceiling has been increased to ₹25 lakhs from the present ₹7.5 lakhs.

  • Central Government Employees Group Insurance Scheme (CGEGIS): The Rates of contribution as also the insurance coverage under the CGEGIS have remained unchanged for long. They have now been enhanced suitably. This is a very good provision under 7th Pay Commission.
  • Medical Facilities –

a. Introduction of a Health Insurance Scheme for Central Government employees and pensioners has been recommended.

b. 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.

c. All postal pensioners should be covered under CGHS. All postal dispensaries should be merged with CGHS. This is an excellent move under 7th Pay Commission.

  • Pension: The Commission recommends a revised pension formulation for civil employees including CAPF personnel as well as for Defence personnel, who have retired before 01.01.2016. This formulation will bring about equality and parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.
  • Gratuity: Enhancement in the ceiling of gratuity from the existing Rs.10 lakh to Rs.20 lakh. The ceiling on gratuity may be raised by 25% whenever DA rises by 50%
  • Disability Pension for Armed Forces: The Commission is recommending reverting to a slab based system for disability element, instead of existing percentile based disability pension regime.
  • Ex-gratia Lump sum Compensation to Next of Kin: The 7th Pay Commission is recommending the 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.
  • Martyr Status for 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.
  • New Pension System under 7th Pay Commission: The Commission received many grievances relating to NPS. It has recommended a number of steps to improve the functioning of NPS. It has also recommended establishment of a strong grievance redressal mechanism.
  • Regulatory Bodies under 7th Pay Commission: The Commission has recommended a consolidated pay package of Rs.4,50,000 and Rs.4,00,000 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% as and when Dearness Allowance goes up by 50%. For Members of the remaining Regulatory bodies normal replacement pay has been recommended.
  • Performance Related Pay as per 7th Pay Commission: 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. The Commission has also recommended that the PRP should subsume the existing Bonus schemes.

Recommended View here the Latest Salary Structure of Various Professions

Effect of 7th Pay Commission on the Indian Economy

Once the government implements the 7th Pay Commission,  it will provide Rs 1 lakh crore in the hands of almost one crore consumers, which will increase the overall demand. Besides, the states will also increase their pay commissions if the central government accepts the 7th Pay Commission Report. Therefore, there will be a huge increase in the disposable income of Indian consumers, which eventually boost the Indian economy. So overall, 7th Pay Commission is good.

Implications of 7th Pay Commission on the Government

Once the 7th Pay Commission comes into force, it will increase the expenditure of the government. Thus it will be challenging for the Union government to meet the fiscal deficit target of 3.5% in FY2017 and 3% in FY2018.

As of now, Government has reduced the oil subsidy burden, but it is still not able to fully implement the direct benefit transfer schemes (food and kerosene) to prevent slippage. For a successful 7th Pay Commission implementation, Government will have to cut its investments targets or to rely on divestment program to meet the fiscal deficit targets.

Will 7th Pay Commission Benefit the Private Sector ?

  • Salary hike in private sector likely: This is likely not as a direct result but indirectly. Many private sector companies co-relate their salary with the ones that are being paid by the government. So, a rise is apparent. But this change will be both sporadic & spatially varied. But for now, private sector employees are left a little poor than their government counterparts.
  • Private sector boom: With increased salary, demand for consumer goods likely going to get higher. So, overall this should show a positive trend to industrial & service sector growth. Meaning, higher car sales, people want to by new flats, etc.

Points of Conflict Related to 7th Pay Commission

There are few recommendations of the Commission where there was no unanimity of view and these are as follows –

The Edge: An edge is presently accorded to the Indian Administrative Service (IAS) and the Indian Foreign Service (IFS) at three promotion stages from Senior Time Scale (STS), to the Junior Administrative Grade (JAG) and the NFSG. is recommended by the Chairman, to be extended to the Indian Police Service (IPS) and Indian Forest Service (IFoS).
Shri Vivek Rae, Member is of the view that financial edge is justified only for the IAS and IFS. Dr. Rathin Roy, Member is of the view that the financial edge accorded to the IAS and IFS should be removed. So this is the 1st point of conflict under the 7th Pay Commission.

Empanelment: The Chairman and Dr. Rathin Roy, Member, recommend that All India Service officers and Central Services Group A officers who have completed 17 years of service should be eligible for empanelment under the Central Staffing Scheme and there should not be “two year edge”, vis-à-vis the IAS. Shri Vivek Rae, Member, has not agreed with this view and has recommended review of the Central Staffing Scheme guidelines.

Non Functional Upgradation for Organised Group ‘A’ Services: The Chairman is of the view that NFU availed by all the organised Group `A‟ Services should be allowed to continue and be extended to all officers in the CAPFs, Indian Coast Guard and the Defence forces. NFU should henceforth be based on the respective residency periods in the preceding substantive grade. Shri Vivek Rae, Member and Dr. Rathin Roy, Member, have favoured abolition of NFU at SAG and HAG level.

Superannuation: Chairman and Dr. Rathin Roy, Member, recommend the age of superannuation for all CAPF personnel should be 60 years uniformly. Shri Vivek Rae, Member, has not agreed with this recommendation and has endorsed the stand of the Ministry of Home Affairs. So there is a slight controversy on this point under 7th Pay Commission.

Seeing the 7th Pay Commission recommendations, seems like having a Sarkari Naukri isn’t that bad after all ?

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