7th Pay Commission proposes 23.55% hike in salary, lowest in 70 years

Seventh Pay Commission report: For the Secretaries, maximum pay has been fixed at Rs 2.25 lakh as against Rs 80,000 currently.

New Delhi: A 23.55 percent hike in salary, allowances and pension involving an additional burden of Rs 1.02 lakh crore has been recommended to central government employees and pensioners by the 7th Pay Commission which more than doubled the entry and top level pay while favouring a virtual OROP for civilians.

The recommendations that will benefit 47 lakh central government employees and 52 lakh pensioners, which will impact the Central Budget by Rs 73,650 crore and the Railway Budget by Rs 28,450 crore.

The 900-page report of the 7th Pay Commission headed by Justice A K Mathur was presented to Finance Minister Arun Jaitley with a recommendation that the new scales be implemented from January 1 next year.

The panel recommended a 14.27 percent increase in basic pay, the lowest in 70 years. The previous 6th Pay Commission had recommended a 20 percent hike which the government doubled while implementing it in 2008.

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The 23.55 percent increase includes hike in allowances.

The entry level pay has been recommended to be raised to Rs 18,000 per month from current Rs 7,000 while the maximum pay, drawn by the Cabinet Secretary, has been fixed at Rs 2.5 lakh per month from current Rs 90,000. For the Secretaries it has been fixed at Rs 2.25 lakh as against Rs 80,000 currently.

In a significant recommendation, the report favoured introduction of a health insurance insurance scheme for staff and pensioners and doubling the gratuity ceiling to Rs 20 lakh.

The award of the pay panel will also benefit staff of autonomous bodies, universities and public sector units, Jaitley said after receiving the report.

He said the impact of the recommendations would be an increase of 0.65 percentage on expenditure on salaries to GDP compared to 0.77 percent in 6th Pay Commission.

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The report will be studied by a secretariat headed by Expenditure Secretary before government takes a decision.

"In percentage terms, the overall increase in pay and allowance and pensions over the business-as-usual scenario will be 23.55 percent," the report said. Within this, the increase in pay will be 16 percent, in allowances 63 percent and in pension would be 24 percent, it said.

The total salary and pension bill of the central government, which will also include railway employees, will go up from estimated Rs 4.33 lakh crore to Rs 5.35 lakh crore during 2016-17.

The panel has suggested abolition of the pay band and the grade pay, though it retained the annual increment of 3 percent.

It has also recommended a fitment factor of 2.57 which will be applied uniformly to all employees.

Based on current trends, the total expenditure on pay and allowances during 2016-17 will go up to Rs 283,400 crore, reflecting a 16 percent increase of Rs 39,100 crore over the current scales.

Expenditure on HRA is likely to go up to Rs 29,600 crore from Rs 12,400 crore and on allowances by about Rs 29,300 crore. On pensions, the outgo will be Rs 176,300 crore, reflecting an increase of Rs 33,700 crore, most of it on account of OROP.

Without calling it one-rank-one-pension (OROP), the Pay Commission recommended a revised pension formulation for the central government employees, including para-military personnel as well as for defence staff who have retired before January 1, 2016.

The Chairman and other member Dr Rathin Roy recommended the age of superannuation for all central armed forces personnel to be raised to 60 years from current 58 years, another member Vivek Rae did not agree with it. He endorsed the stand of Home Ministry.

The formulation will bring parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.

In a significant recommendation, it enhanced the ceiling of gratuity from the existing Rs 10 lakh to Rs 20 lakh. And the same will be raised by 25 percent whenever DA be raised by 50 percent.

In the new pay structure, the grade pay has been subsumed in the pay matrix and the status of the employee, now determined by grade pay, will now be determined by the level in the matrix.

Introduction of a health insurance scheme for employees and pensioners has been recommended. Meanwhile for the benefit of pensioners 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 must be covered under CGHS. All postal dispensaries should be merged with CGHS.

Under the central government employees group insurance scheme, the rates of contribution as well as insurance coverage have now been enhanced suitably. Monthly deduction has been raised from Rs 120 per month to Rs 5,000 and insurance cover from Rs 1.2 lakh to Rs 50 lakh for senior most level. At the bottom of the matrix, it has been raised from Rs 30 per month to Rs 1,500 and the cover hiked from Rs 30,000 to Rs 15 lakh.

The Commission recommended abolition of all non-interest bearing advances and increased the limit for interest-bearing advances for buying home from Rs 7.5 lakh to Rs 25 lakh.

Under the Modified Assured Career Progression (MACP) the Commission has 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.

The Commission has also 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 suggested that the PRP should subsume the existing Bonus schemes.

It has suggested 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.

In view of grievances relating to New Pension Scheme (NPS), it suggested steps to improve the functioning of scheme and establishment of a strong grievance redressal mechanism.

The Commission has recommended a consolidated monthly pay package of Rs 4.50 lakh and Rs 4 lakh for chairpersons and members respectively of the regulatory bodies.

In case of retired government servants, it said, their pension should not be deducted from their consolidated pay. The consolidated pay package should be raised by 25 percent and Dearness Allowance by 50 percent.