Cabinet clears 23.5% hike in pay for Central govt. staff

Government accepts recommendations of Seventh Pay Commission. Four panels formed to study concerns raised by employees

June 29, 2016 12:11 pm | Updated December 04, 2021 11:12 pm IST - New Delhi

The BJP-led NDA government on Wednesday announced an overall increase of 23.5 per cent for over one crore government employees and pensioners in line with the Seventh Pay Commission’s recommendations, which left most services dissatisfied. The hikes will come with the August paychecks and be paid with effect from January 1, 2016. The arrears for the six months will be disbursed during the current financial year (2016-17) itself.

In November 2015, within the overall hike of 23.55-per cent, the pay panel had recommended increases of 16% in pay and 24 per cent in pensions. The starting salary for new recruits at the lowest level has been raised to Rs. 18,000 from Rs. 7,000 per month. Freshly recruited Class I officers will receive Rs. 56,100. This reflects a compression ratio of 1:3.12 signifying that the pay of a Class I officer on direct recruitment will be three times the pay of an entrant at the lowest level.

The approved maximum pay, drawn by the Cabinet Secretary, is Rs. 2.5 lakh per month (against the current Rs. 90,000), higher than the salaries drawn by MPs.

To examine the concerns employees have raised, the Union Cabinet decided to set up four committees: The first will look into the implementation issues anticipated and the second one will go into the likely anomalies. Another one will further examine the recommendations on allowances, which have largely been kept on hold. The fourth will suggest measures for streamlining the National Pension System.

Nod for new pay matrix

The Union Cabinet dispensed with the present system of pay bands and grade pay and okayed a new pay matrix as recommended by the Pay Commission.

Employee status, hitherto determined by grade pay, will now be determined by the level in the pay matrix. Separate pay matrices have been drawn up for civilians, defence personnel and for Military Nursing Service with all existing levels subsumed in the new structure; no new levels have been introduced nor has any level been dispensed with.

Gratuity ceiling raised

The gratuity ceiling stands enhanced from Rs. 10 lakh to 20 lakh. The ceiling on gratuity will increase by 25 per cent whenever dearness allowance rises by 50 per cent.

The Cabinet also approved the recommendation of the commission to enhance the ceiling of house building advance from Rs. 7.5 lakh to Rs. 25 lakh. All but four interest-free advances have been abolished

“The fifth and sixth pay commissions had narrowed the gap between salaries paid in the private and government sectors…the seventh has moved further in the same direction. An IIM-Ahmedabad study has found that pay in the government sector is distinctly greater than that in the private sector so there can’t be protests from employees,” said Union Finance Minister Arun Jaitley.

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