7th Pay Commission

7th Pay Commission: Overview

About the 7th Pay Commission

After the sixth pay commission was dissolved in 2008, the 7th Pay Commission also called the 7th Central Pay Commission (7CPC) was constituted in February, 2014 with a purpose of reviewing the principles and guidelines of payments and compensations of all central government employees, both belonging to the civilian class and the defence forces. The implementation of the decisions of the 7th Pay Commission is expected to affect the emoluments of the armed forces personnel especially.

Most of the recommendations of the 7th CPC with minor revisions were implemented by the government of India and its departments in September 2016. The seventh pay commission was majorly formed to focus on the disparities in emoluments of the defence personal of India since the 6th pay commission didn’t solve many of their grievances.

Recommendations and Effect of the 7th Pay Commission

Earlier, the suggestions of the 7th Central Pay Commission were to be implemented with effect from 1st January 2016 however they were implemented in the September of 2016. In any case from these recommendations the central government employees stand to benefit from the hikes they will receive in their salary structure.

The 7th CPC recommendations cover approximately forty-seven lakh central government employees and fifty-three lakh pensioners. Minimum wage and maximum wage hikes for both civilian and defence personnel also come under the 7th CPC’s ambit.

In November 2015, the 7th CPC recommended a 14.27% hike in the basic pay of the junior level central government employees. This was comparably lower than their previous salary increases which happened through the pay commissions. In one instance, the previous iterations of the pay commission boast of a 40% hike in the basic pay of junior level central government employees in 2008.

Anyway, this revision made by the 7th Central Pay Commission increased the minimum compensation that can be awarded to a central government employee from Rupees 7,000 per month to Rupees 18,000 per month, i.e. a monthly increase of 11,000 Rupees in the salary.

Moreover, after the seventh pay commission, the maximum payment which can be drawn by a central government employee stands at Rupees 2.25 lakh per month for an employee at the Apex Scale and Rupees 2.5 lakh per month for someone at the Cabinet Secretary Level rather than the earlier Rupees 90,000, i.e. a minimum increase of Rupees 1 lakh 35 thousand per month.

For the Pay in Pay Band plus Grade Pay, the current Pay Matrix salary structure is recommended to be multiplied by a factor of 2.57 to obtain the new salary structure, i.e. the current salary structure is deemed to be 2.57 times the pre-seventh pay commission salary structure. This is the government’s fitment formula for the 7th Pay Commission.

The Seventh Pay Commission has allotted two dates each year for granting increments to central government employees, Jan 1st or July 1st rather than a single date, July 1st like before. The central government employees will be getting only a single increment each year as per the panel’s recommendations. That too shall depend on the employee’s date of appointment, employee’s last promotion date and the last time the employee was granted a financial upgradation.

Additionally, in an effort to avoid future iterations of pay commissions in India, the 7th CPC has recommended for a yearly annual increment of 3% of the concerned central government employees. Also, the 7th Central Pay Commission has brought the performance benchmark for Modified Assured Career Progression (MACP) to “Very Good” rating on the appraisal sheet. Before this the performance benchmark required for MACP was “Good”. However, the 10 year, 20 year and 30 year service slab continues in their appraisal structure.

The 7th Pay Commission has also put forth the suggestion that annual increments shall not be awarded to employees who are unable to meet their performance benchmarks for MACP and/or regular promotion in the initial twenty years of their period of service.

Considering that among the 47 lakh central govt. employees, only 14 lakh are serving and among the 53 lakh pensioners, 18 lakh are in the armed forces of the country, the seventh pay commission has recommended to do away with fifty three of the one ninety six allowances the central government employees receive. This will be done by clubbing allowances or deleting obsolete ones so as to gain more clarity and transparency. Moreover, you shall note that as per the central government estimates, in the year 2016-17, the 7th pay commission is going to cost the exchequer approximately Rupees 1 lakh Crore.

Effect of 7th Pay Commission on Defence Personnel

As discussed before, the salary structure for the armed forces personnel shall also undergo changes from the recommendations of the 7th Central Pay Commission. The monetary reimbursement for the various sectors of military services is called the Military Service Pay. The compensations based on the Military Service Pay structure are paid to all defence personnel, right from the lowest rank to the highest rank.

The pay rates which were recommended by the seventh pay commission for Military Service Pay are discussed below. These recommendations mention the MSP per month and the revised rates too.
Service Officers who were getting 6,000 Rupees before shall now get 15,500 Rupees. Nursing Officers shall after 7 CPC get 10,800 Rupees instead of 4,200 Rupees. JCOs and ORs shall now draw 5,200 Rupees post 7CPC instead of 2,000 Rupees like before. Non-Combatants shall now take away 3,600 Rupees instead of 1,000 Rupees.

The changes in the Short Service Commissioned Officers compensation are also significant. Most importantly, the Short Service Commissioned Officers are now permitted to exit the Armed Forces between 7 to 10 years of service. They shall also be liable to get a terminal gratuity similar to 10.5 months of reckonable remunerations along with an entitlement of a fully-funded 1 year Executive Programme or a masters’ programme in a highly regarded institute.

For Lateral Entries and Settlements, the 7th CPC has put forth a revised format in which such personnel have higher chances of being absorbed. For lateral entry into Central Armed Police Forces (CAPFs), a striking severance package is recommended. Also, equivalence in salary between the personnel who are posted at the headquarters and the personnel who are posted at the field are recommended for similar functionary jobs such as of Assistants and Stenos.

Moreover, the 7th Pay Commission has also recommended a cadre review of the Group ‘A’ officers and have suggested to abolish all the 52 allowances. Many other allowances have either been subsumed or clubbed with newly proposed allowances. Allowances concerned with the Risk and Hardship of the soldiers are to be handled by the 9-cell Risk and Hardship Matrix now as per 7CPC suggestions. This matrix shall also now handle the Siachen Allowance. Additionally, the 7th CPC has suggested revising the current HRA rates too. They have also suggested rationalizing the current HRA rates by multiplying them by a factor of 0.81, i.e. if your salary has a 20% HRA component then post-7CPC you shall receive an HRA component of 16.2% in your salary. 

Transport allowances have also been revised in the seventh pay commission recommendations as now an employee with a pay level of 9 and above is eligible to get 7,200 Rupees +Daly Allowance in big cities and at other places is eligible to get 3,600 Rupees + Daly Allowance. Additionally, employees with levels 3 to 8 are now eligible to get 3,600 Rupees + Daly Allowance in big cities and 1,800 Rupees + Daly Allowance in other places. Furthermore, for levels 1 and 2 employees, transport allowance in big cities is recommended to be 1,350 Rupees + Daly Allowance and in other places it is recommended to be 900 Rupees + Daly Allowance.

When it comes to advances, all non-interest bearing advances have been retracted in the 7th CPC recommendations. As far as interest bearing advances are concerned, the Personal Computer Advance and House Building Advance (HBA) have been recalled. The HBA ceiling has been raised to 25 lakh Rupees from the present 7.5 lakh Rupees.

Effect of 7th Pay Commission on CGEGIS

The insurance coverage rates under the Central Govt. Employees Group Insurance Scheme (CGEGIS) have not changed for long. They have been increased in the 7th CPC recommendations. If earlier, 120 Rupees were deducted from your compensation against CGEGIS head then now 5,000 Rupees will be deducted from your salary for the same.  If prior to 7th CPC the deduction against CGEGIS from your salary was 60 Rupees then now it will be 2,500 Rupees. And if the CGEGIS deduction from your salary was 30 Rupees before then after 7CPC implementation, the deduction will be 1,500 Rupees.

Effect of 7th Pay Commission on Health Insurance Scheme

The 7th Central Pay Commission wants to introduce a health insurance scheme for central government employees and pensioners. While this scheme is being implemented, for pensioners residing out of the Central Government Health Scheme (CGHS)-providing areas, the 7th pay commission has recommended that CGHS panel allot such hospitals for pensioners which are in the CS (MA)/ECHS panel. This will serve the medical allowance requirements of the pensioners living in the non-CGHS areas. These hospital premises should also encourage cashless transactions and these facilities should be equipped with cashless fee-collection equipment and procedure. This would also require adding administrative personnel in the neighbouring CGHS centres. Such resource addition is going to help with pending grievances.

The 7th Pay commission has also suggested that the remaining 33 postal dispensaries should be combined with CGHS dispensaries. The Commission also wants all postal pensioners to be covered under CGHS through the due process.

Effect of 7th Pay Commission on Pension

In the Pay matrix first, the past pensioners’ pension should be fixed as per 7th CPC recommendations. Their 7 CPC pension should be decided on the basis of Pay Band and Grade Pay at which they retired. It shall be fixed at the minimum of the corresponding level in the pay matrix.

This amount can be arrived to by adding the number of increments which the employee has added while in service and raising that amount by 3% rate. This is how national pay of retirees is suggested to be arrived at by the 7th Central Pay Commission.

If this pension calculation is for a Defence Personnel then the amount will also have to include Military Service Pay 0. 50% of the total amount so calculated shall be the new pension. The pension is also deemed to be 2.57-times of the current basic pension as per another way of computing pension. The pensioner is deemed to get the higher of the two as per 7 CPC recommendations.

Effect of 7th Pay Commission on Gratuity

The 7th CPC has proposed to increase the Gratuity ceiling from Rupees 10 lakh to Rupees 20 lakh. Also, it has been suggested by the commission that if the Daily Allowance rises by 50% then the gratuity must be raised by 25%.

Effect of 7th Pay Commission on the Disability Pension for Armed Forces

The commission has suggested reverting to a slab-based system when calculating disability based pension instead of the current percentile based disability system through which the armed forces disability pension is distributed.

Effect of 7th Pay Commission on National Pension Scheme

The 7th CPC has recommended radical improvements in the National Pension Scheme (NPS) inner-workings to expedite the resolutions of the pending grievances against the pension system.

Effect of 7th Pay Commission on the Allotment of Leave

For Casual Leaves, no change has been recommended by the 7th CPC. The same is true for Child Adoption Leaves. As far as Child Care Leaves are concerned, the 7th Pay Commission has suggested to grant this leave at 100% of salary compensation for the first 365 days to employees and then at 80% of salary compensation for next year. The said commission has also suggested granting single male parents with this leave. Commuted Leave, Leave No Due, Paternity Leave, Study Leave heads have not undergone any change in the 7th CPC recommendations. Also, there is no change to the Earned Leaves head with respect to encashment.

Effect of 7th Pay Commission on General Provident Fund

Moreover, the General Provident Fund rules are the same as before in the 7th CPC recommendations.

Effect of 7th Pay Commission on Children Education Allowance

When discussing the head, Children Education Allowance, the Commission has suggested that this allowance should be calculated in a way that the government doesn’t end-up subsidizing private education of its employees’ children.

One shall also note that the 7CPC recommendations state that whenever the Daily Allowance is increased, the Hotel Subsidy and the Children Education Allowance shall be increased by 25%. As per the commission, the allowance shall be doubled for differently-abled children. Moreover, the extension of any and all allowances beyond Class XII was cut off by the commission.

General Points on the effect of 7th Pay Commission recommendations

The latest  updates suggest that the 7th Pay Commission recommendations on allowances and disbursements of arrears is getting clear by the day with the salary structure of the government employees ready to be altered. A brief of their recommendations is as follows:

  • The 7th Central Pay Commission is expected to impact more than 1 Crore central government employees with a fiscal impact of Rupees 1, 02, 100 Crore in FY 2016-17. An additional alteration of more than Rupees 12 thousand Crore is expected to be brought upon by paying out arrears of pay and pension for two months in the year 2015-16.
  • 7th Pay Commission report shall begin the disbursements of allowances to employees expecting to increase the consumption and boost the economy.
  • In the 7CPC, a new system of Pay Band and Grade Pay has been introduced. This will end up in creating a separate Pay matrix for Civilians Defence Personnel and Military Nursing Service. The CPC has worked on the method of rationalization which means that an employee at the lowest band of salary and who has been newly recruited will get a minimum compensation of Rupees 18,000 per month while a newly recruited Class-I officer will get a minimum compensation of Rupees 56,100 per month.

Conclusively, it is expected that the disbursement of allowances as per 7 CPC recommendations will have an effect on the accumulated demand in the country and will increase consumption too. Savings of central government employees and their families are expected to expand too.

The Fiscal deficit is expected to be impacted as salary increases, additional pension payments will push demand and consumer spending in the coming times. This proves that the 7th Central Pay Commission recommendations are going to be a remarkable step ahead in creating a vibrant economy.

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