The first Pay Commission of India was established on January, 1946 and it submitted its report in May, 1947 to the interim government of India. The composition of the Pay Commission comes under the Department of Expenditure (Ministry of Finance).
Pay Commission is set up to review the work and pay structure of all civil and military divisions of the Government of India. Respective state governments also implement the recommendations of Pay Commission in their respective states.
Why Pay Commission is required
As we know that over the years the price of different goods and services increases due to increase in the cost of production. Due to higher rate of inflation the purchasing power of the money decreases that is why the fixed salary of the central and state government becomes insufficient to fulfil their basic needs. If this situation continues till long time then there is possibility that either the employees will go on strike or involve themselves in the corrupt practices.
So to meet the requirements of the employees the government of India set up Pay Commission at the gap of every 10 years. Till date 7 Pay Commissions have been set up in the country.
The Composition of the 7th Pay Commission;
The composition of the 7th Pay Commission is done on 25 September 2013 under the chairmanship of the Justice A.K. Singh Mathur. The recommendations of the Seventh Pay Commission were implemented since January 1, 2016.
Financial implications of the 7th Pay Commission
The total financial impact is likely to be Rs 1,02,100 crore in the FY 2016-17. 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.
Worth to mention that out of the total financial impact of Rs 1,02,100 crore; Rs 28,450 crore will be borne by the Railway Budget and Rs 73,650 crore by the General Budget.
In percentage terms the overall increase in pay & allowances and pensions will be 23.55%. Out of the 23.55% the increase in pay will be 16%, increase in pension would be 24% and increase in allowances will be 63%.
Note: The rate of annual increment is being retained at 3%.
Other important facts about the 7th Pay Commission
1. Minimum Pay: As per the “Aykroyd formula”, the minimum pay in government jobs is recommended to be set at Rs 18,000 per month.
According to Aykroyd formula, the 7th Pay Commission will be the last Pay Commission after which eighth Pay Commission will not be set up. Justice AK Mathur, who is heading the Seventh Pay Commission, said that considering the data available on the basis of the value index, the government should review the salaries of central government employees every year.
2. Maximum Pay: Rs 2.25 lac per month for Apex Scale and Rs 2.5 lac per month for Cabinet Secretary and others presently at the same pay level.
3. House Rent Allowance: The Commission recommends that HRA be paid at the rate of 24%, 16% and 8% of the new Basic Pay for Class X, Y and Z cities respectively.
The Commission also recommends that the rate of HRA will be revised to 27%, 18% and 9% respectively when DA crosses 50 percent.
4. Pension: The Pay Commission has recommended a revised pension formula for civil employees including CAPF personnel as well as for Defence personnel, who have retired before 1st January, 2016.
5. 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%.
6. Martyr Status for the Central Armed Police Forces (CAPF) Personnel: The Pay Commission says if a CAPF Personnel died on duty then the force personnel of CAPFs should be given the status of martyr, at par with the defence forces personnel.
At the beginning of the Pay Commission, the minimum salary of the employees was Rs 35, which became Rs 80 after the second Pay Commission, Rs 185 after the third commission, and Rs. 18000 after the seventh Pay Commission.
Thus, it can be concluded that the government of India is doing great job by establishing a pay commission after the gap of 10 years. The establishment of the pay commission compensates the government employees to receive the pay as per the inflation rate in the country.
We hope that after reading this article you must clearly understand that what are the basic recommendations of the 7th Pay Commission of India and how will it influence the government’s exchequer?