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7th Pay Commission: What you must know about it?

01 June 2017
The 7th Pay Commission is on the verge of being finalised. Here’s what you should know about it.

Pay Commission is constituted by the Government of India almost every 10 years. The purpose of pay commissions is to give recommendations concerning the changes in the salary of civil and military government employees in India. Till date, there have been 7 pay commissions, with the first one starting in 1946.

7th Pay Commission

Under Justice A.K Mathur, the recommendations of the Seventh Pay Commission were accepted on June 29, 2016. As per the report, after evaluation and discussion, the salaries of government employees have been increased from 14% (Base pay) to 23% (overall pay). The new salary rules are expected to benefit almost 50 lakh government employees and about 58 lakh pensioners.

Related: Components of your salary and their tax benefits

Highlights of the 7th pay commission

Few noticeable facts regarding 7th pay commission are:

  • The minimum pay of a central government employee will be Rs 18,000/- p.m., while the highest will be Rs. 2.5 lakh.
  • The benchmark of the performance was raised from ‘good’ to ‘very good’, in order to get annual increment for MACP (Minimum Assured Career Progression) or regular promotion.
  • The financial impact works out to around Rs 1.02 lakh crores, or 0.7% of GDP.
  • MSP or Military Service Pay more than doubled from Rs. 6000 to Rs 15,500 p.m.
  • The commission has recommended an increase of House Building Advance from Rs. 7.5 lakhs to Rs. 25 lakhs.
  • A group insurance scheme for government employees that has been recommended includes low premium and high risk cover.
  • The Gratuity ceiling has been raised from Rs. 10 lakhs to 20 lakhs.
  • The Department of Personnel and Training (DoPT) has been asked to take action on the pay issues of IAS, IPS and Indian Forest Service (IFoS) category employees.

Latest news on 7th pay commission

The Employee Union had demanded a higher allowance and Dearness Allowance (DA), higher basic pay and a hiked HRA of 30%, 20% and 10% as against 24%, 16% and 8%, respectively. Of the 196 allowances, the Central Pay Commission suggested abolishing 52 allowances and merging 36 other allowances with existing ones.

Post reviewing these recommendations, the Ashok Lavasa Committee suggested modifying certain allowances, particularly those that are applicable to all government employees.

Related: Most important tax changes from April 1

What is the Ashok Lavasa Committee?

The Ashok Lavasa Committee was established in June 2016, after the government put into effect recommendations of the 7th Pay Commission. The committee, headed by Finance Secretary - Ashok Lavasa, was put in charge of reviewing the various significant changes proposed by the 7th pay commission, in regards to the allowance structure.

So far, recommendations on pay and pension, made by the 7th pay commission, have been approved by the cabinet. This includes a further expenditure of around Rs 5031 crores (for 2016-2017), in addition to the already revised expenditure. It also includes an additional benefit to pensioners, which is said to be benefiting more than 55-lakh pre-2016 defense, civil and family pensioners.

Other allowances will continue to be paid at old rates, until the Union Cabinet approve the pending recommendations.

An update on revised allowances will be shared by the government after the final discussion, which is expected to happen in the next one or two weeks.

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