7th Pay Commission: Latest updates on pay structure, PF, gratuity, DA, DR and arrears

The month of April may bring in a host of changes in the employees' pay structure, once the new wage code is brought into effect. The government's notification on Code on Wages 2019 may reduce the take-home pay of employees next financial year ie, April 2021 while components like PF and Gratuity might rise. This is based on the grounds that the new wage code mentions provision entailing that the employee's basic salary will be at least 50 percent of his/her net monthly CTC. Hence, if this provision comes into effect, it will mean that employees will not be able to get more than 50 percent of his/her net monthly salary in form of allowance.

Additionally, central government employees, waiting with a baited breath for the announcement on dearness allowance (DA)  hike under the recommendation of 7th Pay Commission by the government, may also hear some good news in the month of January. The buzz around increase in dearness allowance by up to 4 percent has gained further momentum after the announcement of All India Consumer Price Index.

It has been widely reported in the media that the Modi government may increase dearness allowance by up to 4 percent, leading to a substantial hike in the salary of the central government employees. In further cheer to 50 lakh central government employees and 61 lakh pensioners, the government will also make announcements regarding hike in Dearness Relief (DR).

The government's announcement on DA hike will be based on the recommendation of the 7th Pay Commission. At present, central employees get DA of 17 percent, and hence a further increase of DA by 4 percent, will take the total DA to 21 percent. In the aftermath of the COVID-19 crisis, all eyes are fixed on the government's announcement. The DA hike will kick in from January to June 2021 period.

In view of the crisis arising out of COVID-19, the government had decided that additional instalment of dearness allowance payable to central government employees and dearness relief (DR) to central government pensioners due from January 1, 2020, shall not be paid. The additional instalment of DA and DR due from July 1, 2020, and January 1, 2021, shall also not be paid, the Department of Expenditure said in an office memorandum. However, DA and DR at current rates will continue to be paid.