Seventh / 7th Pay Commission approved by the Union Cabinet, 24% Salaries, Pensions Hike

29th June 2016 Union Cabinet on Wednesday approved the recommendations made by the 7th pay commission. Overall increase in Salaries and allowances will rise by at least 23.5 per cent, which had been recommended by the 7th Pay Commission - the panel that decides on government salaries. Arrears will be paid within this year. The 7th Pay Commission report will be effective from January 1, and the Cabinet will decide if the arrears for the six months have to be paid in one go or in installments.

Under the new scheme, the maximum salary for a government servant will be about 2.5 lakhs a month, that's more than double the highest pay of Rs. 90,000  a month. Gratuity has been increased from Rs 10 lakh to Rs 25 lakh and House Building Advance was raised from Rs 7.5 lakh to Rs 25 lakh. Finance Minister Arun Jaitley accepted the recommendation to increase minimum pay from existing Rs 7,000 to Rs 18,000 per month which is more than double of the present Rs. 7,000.

Up to 15% hike in basic salaries of central government staff and similar big raises in allowances and pensions that will benefit some 10 million employees. For junior employees, the hike in basic pay will be 14.27%. This means a fresh IAS recruit will get a basic salary of Rs 56,000 a month against Rs 23,000 now, while a sepoy in the Indian Army will earn Rs 21,700 a month from Rs 8,460 at present. In addition, employees are paid dearness allowance and house rent among many other allowances.

7th Pay Commission approved by the Union Cabinet

In a nutshell
# House Building Advance (HBA) increased from Rs 7.5 lakh to Rs 25 lakh.
# Gratuity increased from Rs 10 lakh to Rs 20 lakh.
# Rate of increment recommended and accepted at 3% per year.
# Separate pay matrices for civil, Defence and MNS.
# MoF to work out a customised group insurance scheme with low premium and high risk cover.

# Ex-gratia lump sum compensation for civil and defence forces personnel from 10-20 lakh to 25-45 lakh.

# Minimum pay of Rs 18,000 per month recommended against the existing Rs 7,000.

# Based on Minimum Pay, fitment factor of 2.57 approved for revising pay of all employees uniformly across all Level: Jaitley.

# The cost of implementing the recommendations of the 7th pay commission will cost Rs 1,02,100 crore to the exchequer: Jaitley.

Last year in November the pay panel had recommended 14.27 per cent hike in basic pay at junior levels, the lowest in 70 years.The 6th Pay Commission had recommended a 20 per cent hike which was doubled by the government while implementing it in 2008.

The government had in January set up the high-powered panel for the recommendations of the 7th Pay Commission.

For the 7th Pay Commission effective from January 1 2016 Cabinet will decide if the arrears for the six months have to be paid in one go or in installments.

"Considering the tight fiscal position this year, the government may improve upon the Pay Commission recommendation for basic pay to 18 per cent or at best 20 per cent," a senior official said.

Here is your 10-point cheat-sheet to this big story:

1. The move will benefit an estimated 10 million government employees including nearly 60 lakh pensioners, starting from January 1, 2016. Among the defence services, 14 lakh serving officers and 18 lakh retired members will be covered.
2. Arrears will be paid within this year, said Finance Minister Arun Jaitley.
3. The last major hike in 2008 saw an average raise of nearly 50 percent. The auto and retail sectors gained in the stock market after today's announcement.
4. The increments - considerably smaller than past increases-  will cost the government about one lakh crores or 15 billion dollars every year.
5. While this cost is a whopping 0.7 percent of India's GDP, the hike is the lowest in the last seven decades.
6. The new allowances and hikes were cleared by the cabinet today and are based on the recommendations of the Seventh Pay Commission - a government committee which reviews the pay of government employees nearly every decade.
7. Government workers also have been getting half-yearly and annual increments linked to prices. The new rules do away with 52 allowances and merge 36 others.
8. Under the new scheme, the maximum salary for a government servant will be about 2.5 lakhs a month, that's more than double the top-rung pay of Rs. 90,000 a month.
9. The least a government officer can now be paid is  Rs. 18,000 a month, more than double the current compensation of Rs. 7,000 offered to the most  junior employees.
10. The government is counting on the higher salaries to result in more consumer spending which could trigger economic growth.However, some experts believe that the additional cash in the market could fuel inflation. To keep a check on price rise driven by greater liquidity in the market, the government plans to keep a close eye on the mark

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