GOVERNMENT OF INDIA
MINISTRY OF FINANCE
LOK SABHA

UNSTARRED QUESTION NO: 1652
ANSWERED ON: 27.07.2018

Pay Commission Reports

RAJENDRA AGRAWAL
Will the Minister of FINANCE be pleased to state:-

(a) whether the reports of successive Pay Commissions have been increasing the burden on Government finances/exchequer in partially accepting their recommendations for increase in wages and if so, the details thereof;

(b) whether the last Pay Commission has suggested productivity linked pay hike to the deserving employees to eliminate below average or mediocre performance and if so, the details thereof;

(c) whether such periodic hikes in wages resulting from Pay Commission recommendations trigger similar demands from the State Government/public utility employees, imposing burden on already strained State finances and if so, the details thereof; and

(d) whether the Government is considering an alternative for increasing the salaries and allowances of Central Government employees and pensioners in future instead of forming Pay Commission and if so, the details thereof?

ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI P. RADHAKRISHNAN)

(a) The financial impact of the recommendations of the Central Pay Commission, as accepted by the Government, is normally pronounced in the initial year and gradually it tapers off as the growth in the economy picks up and fiscal space is widened. While implementing the recommendations of the last Central Pay Commission, i.e., the Seventh Central Pay Commission, the Government staggered its implementation in two financial years. While the recommendations on pay and pension were implemented with effect from 01.01.2016, the recommendations in respect of allowances after an examination by a Committee have been implemented with effect from 01.07.2017. This has moderated the financial impact of the recommendations. Moreover, unlike the previous 6th Pay Commission, which entailed substantial impact on account of arrears, the impact in the year 2016-17 on account of element of arrears of revised pay and pension on the present occasion of the 7th Central Pay Commission pertained to only 2 months of the previous financial year of 2015-16.

(b) The Seventh Central Pay Commission in Para 5.1.46 of its Report proposed withholding of annual increment in the case of those employees who are not able to meet the benchmark either for Modified Assured Career Progression (MACP) or regular promotion within the first 20 years of their service.

(c) The service conditions of employees of State Governments fall within the exclusive domain of the respective State Governments who are federally independent of the Central Government. Therefore, the concerned State Governments have to independently take a view in the matter.

(d) No such proposal is under consideration of the Government.

Source: http://nfpe.blogspot.com/

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Based on the recommendations of 7th Central Pay Commission and due consultation and examination by the Empowered Committee of Secretaries and consideration by the Government, the following notifications have been issued and published on the website of Department of Defence:

• Issue of Armed Forces Pay Rules / Regulations, 2017 (for both Officers & JCOs / ORs) dated 3rd May 2017 and amendments thereto dated 6th July 2017 and 14th July 2017 respectively.
• Issue of Non-Combatant (Enrolled) of Air Force Pay Rules, 2017 dated 30th June 2017.
• Issue of Military Nursing Service Pay Rules, 2017 dated 14th July 2017.

Orders for revision of pension / family pension with a multiplication factor of 2.57 to existing pension of pre-2016 retirees Defence Pensioners have been issued and all Pension Disbursing Agencies have implemented the order and released the arrears to pre-2016 Defence pensioners / family pensioners. This information was given by Minister of State for Defence Dr. Subhash Bhamre in a written reply to Shri Arvind Sawant and Shrimati Rekha Verma in Lok Sabha today.

PIB

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The following steps have been taken to implement the recommendations of 7th Pay Commission Report in respect of Armed Forces personnel:

(i) Issue of Resolution dated 25th July 2016 by Ministry of Finance.

(ii) Issue of Resolution dated 5th September 2016 by Ministry of Defence.

(iii) Issue of orders dated 10th October, 2016 by Ministry of Defence for payment of ad-hoc arrears equal to 10% Basic Pay and Dearness Allowance.

The order for revision of pension to ex-servicemen pursuant to the recommendations of 7th Pay Commission Report was issued on 29th October, 2016. As per information available in respect of pre-2016 pensioners, 24 public sector banks have revised pension of 18,99,697 pensioners and have paid Rs.5883.27 crore (approx) on account of arrears of pension / family pension.

This information was given by Minister of State for Defence Dr. Subhash Bhamre in a written reply to Shri Arvind Sawant in Lok Sabha today.

PIB

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DA from January 2017 will be 4% or 5% based on Consumer Price Index (Industrial Workers) from January 2016 to December 2016 – Net increase in DA with effect from January 2017 is estimated to be 2% or 3%

All India Consumer Price Index (Industrial Workers) for the month of November 2016 has been released by Ministry of Labour few days back.

What do we need for estimating DA from January 2017 ?

After implementation of 7th Pay Commission report, same inflation index i.e Consumer Price Index (Industrial Workers) with base year 2001=100, which was used for 6th Pay Commission Pay, is adopted for determining Dearness Allowance of Central Government Employees and Pensioners.

The only difference in DA calculation as far as DA from January 2016 will be, will be taking the Average of CPI-IW recorded in 2015 in the place of Average of CPI-IW recorded in 2005 which was used in 6th CPC DA calculation

In order to determine DA with effect from January 2017, based on the above formula we need Consumer Price Index for the months from January 2016 to December 2016

Now that Consumer Price Index for the months from January 2016 to November 2016 is available, we have made an attempt to estimate Dearness Allowance applicable to Central Government Employees and Pensioners with effect from 1st January 2016, by assuming the possible CPI (IW) for the month of December 2016.

Estimation of DA from 1st January 2017:

Scenario 1 : No increase in AICPI (IW) in December 2016

AICPI (IW) for November 2016 is 277. If AICPI (IW) for December 2016 remains the same as November 2016, there will be additional 1% increase in DA from January 2017 which would make overall DA as 5%.

Scenario 2: Decrease in AICPI (IW) in December 2016

Even if All India Consumer Price Index (Industrial Workers) decreases by 31 point and pegged at 246 in the month of December 2016, DA from January 2017 will be 4% . At the same time even for 1 point decrease in the index for December 2016 will result in lesser DA increase from January 2017 compared to Sceanrio 1 in which index is unaltered in Dec 2016.

Scenario 3 : Increase in AICPI (IW) in December 2016

It is very interesting to note here that, even for increase in consumer price index in the month of December up to 31 points, i.e Increase in AICPI (IW) for December 2016 to 308 points from 277 points in November 2016, DA from January 2017 will be 5% only.

The other scenario that increase of more than 31 points in AICPI (IW) in the month of December 2016 for making DA with effect from January 2017 more than 5% is most unlikely.

Hence, it is more logical to conclude that DA from January 2017 will be either 4% or 5%.

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In Para 5.1.36 of its report, 7th Pay Commission had recommended that one additional increment will be given while fixing of every two stages of pre-revised basic pay (pay in pay band and Grade pay) or scale  in the same pay in the new pay matrix.  This recommendation has been accepted by Govt and an OM has been issued on 7th September 2016 to this effect.

Check the following link to read OM dated 7th September 2016 on Bunching benefits

The Govt has also defined now the meaning of “Stage” in the OM dated 7th September 2016.  Pay drawn by two Government servants in a given Pay Band and Grade pay or scale where the higher pay is at least 3% more than the lower pay shall constitute two stages.

The illustration provided in 7th Pay Commission report for the purpose of granting Bunching Increment was relating to Entry Pay only in the the new Pay Matrix viz., As per Illustration provided in the report Employees in GP 10,000 who are fitted in to minimum of Level 14 of New Pay Matrix will be eligible for one additional increment and would be fitted in to next cell of Level 14.

However, as per the OM dated 7th September 2016, which has clearly defined the meaning of Stage as far as 6th CPC pay is concerned, the bunching benefit will also be applicable to fixation of 7th CPC pay for all the indices of new pay matrix in addition to entry pay.

7th Pay Commission Pay Fixation:

As per Para 5.1.28 of 7th Pay Commission Report, pay fixation in the new pay structure will have to be made as follows

Step 1: Identify Basic Pay (Pay in the pay band plus Grade Pay) drawn by an employee as on the date of implementation. This figure is ‘A’.

Step 2: Multiply ‘A’ with 2.57, round-off to the nearest rupee, and obtain result ‘B’.

Step 3: The figure so arrived at, i.e., ‘B’ or the next higher figure closest to it in the Level assigned to his/her grade pay, will be the new pay in the new pay matrix. In case the value of ‘B’ is less than the starting pay of the Level, then the pay will be equal to the starting pay of that level

7th Pay Commission bunching Benefit:

In addition to above, 7th Pay Commission proposes bunching benefit in Para 5.1.36 whenever more than two stages are bunched together for fixation of pay in 7th CPC pay matrix, one additional increment equal to 3 percent may be given for every two stages bunched, and pay fixed in the subsequent cell in the pay matrix.

Further, Para 5.1.37 of the report provides an illustration for fixation of pay of two employees who are drawing pay of Rs.53,000 and Rs.54,590 in the GP 10000.

As per this illustration, after applying 7CPC multiplication factor of 2.57, both of these employees will have to be fixed in first cell of level 15 in the pay of Rs.1,44,200 as their revisesd pay are worked out to Rs.1,36,210 and Rs.1,40,296 respectively which are not more than the first cell of level 15 (Rs.1,44,200)

But to avoid bunching of these two stages of pay, the person drawing pay of Rs.54,590 will get fixed in second cell of level 15 in the pay of Rs.1,48,500, while the other who is drawing pay of Rs. 53,000 will have to be fixed in Rs.1,44,200.

Based on this illustration, a table containing Entry pay of Rs. 53,000 in GP 10000, subsequent stages for this pay (pay with increment of 3% for every year) and 7th Pay Commission pay fixation for the same has been prepared as below.

Applying same principles, we could find that next stage in entry pay in respect of Grade Pay 1800, 1900. 2000, PB-3-5400, 6600, 7600 and 8900 would be entitled to one additional increment as bunching benefit.

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of 10,000/- (Pay Band (Rs. 37400-67000)

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of Rs. 8900/- (Pay Band 4 – Rs. 37400 to 67000)

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of of Rs 7600/- (Pay Band 3 – Rs. 15600 – 39100)

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of Rs. 6600/- (Pay Band 3 – Rs. 15600 – 39100)

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of Rs. 5400/- (Pay Band 3 – Rs. 15600 – 39100)

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of Rs. 2400/- (Pay Band 1 – Rs. 5200 – 20200)

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of Rs. 2000/- (Pay Band 1 – Rs. 5200 – 20200)

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of Rs. 1900/-

7th Pay Commission Pay with Bunching Benefit in respect of 6th CPC Pay in Pay band with GP of Rs. 1800/-

7th Pay Commission Report submitted – Download Report

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Committee of Secretaries will hold their second meeting regarding the resolution of anomalies in the implementation of 7th Pay Commission. The meeting is scheduled on September 1.

The leading employee union, National Joint Council of Action, headed by Shiv Gopal Mishra, has been invited in the meeting. Aggrieved central government employees pin their hope in the outcome of the meeting. However, many among them have turned increasingly pessimistic, after reports floated earlier in the week stating that the government would not be increasing the minimum salary which has been fixed as Rs 18,000.

Shiv Gopal Mishra is expected to pitch the demands of the government employees before the high-powered committee. As of now, it is not clear whether government would pitch for a compromise with the union. However, the committee members are scheduled to hear the grievances of the employees as raised by the Unions.

One of the foremost demands raised by NJAC is that the government should use 3.68 fitment factor, instead of 2.57 in calculating the minimum salary, as well as the hike in allowances. The minimum salary of government employees as per 6th Pay Commission was Rs 7,000. This was increased by the Justice AK Mathur led panel to Rs 18,000, using the 2.57 fitment factor. If the 3.68 fitment factor would be applied, the entry-level pay would be hiked to Rs 26,000.

The 7th Pay Commission report prepared by Justice (Retd) AK Mathur had suggested the abolition of 51 out of the 194 existing allowances. A total of 27 allowances were subsumed.

Apart from the civilian employees, the armed forces have also marked their objection as the pay panel has refrained from incorporating their demand related to the creation of a uniform pay matrix.

The Defence Pay Matrix has only 24 pay levels, on the other hand, their bureaucratic counterparts enjoy 40 pay levels. Due to this, the armed forces personnel receive less opportunity of salary hikes. Their income gets stagnated at certain points, and even after retirement, they end up drawing Rs 20,000 less as pension, as compared to their civilian counterpart. Similarly, the demand to include Tier-II employees among beneficiaries in the technical allowance has not been paid heed.

The all-important meeting scheduled by the government comes a day before the pan-India strike called by several employee unions across organized sectors against the recommendations of the 7th pay commission.

Source: India.com

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The 7th Pay Commission report is still grabbing headlines as the various permutations and combinations are still being bandied about and discussed threadbare and now it spans a big controversy that has to do with the near monopoly currently enjoyed by the IAS and how to end it, once and for all. Moving forward, as per the requirement of the report, the Narendra Modi government has set up a task force to review the cadre structure of all Organised Group A Central Services. This controversy has acquired increased urgency after the turf war between the officers of the Indian administrative and revenue services (IAS and IRS) recently reached a flashpoint after several IRS officers huddled together in Mumbai last month bringing matters to a head and this set alarm bells ringing at the highest echelons of the government. (PTI)

The 7th Pay Commission task force will be headed by Department of Personnel and Training additional secretary T Jacob and he will submit the report in 3 months. What he will have on his hands will deal with 4 basic factors that include 1) the ideal structure for posts of joint secretary and above, 2) percentage of reserves in organised Group A services, 3) ideal recruitment policy and 4) way forward in mitigating stagnation level. There are 49 Organised Group A Services ranging from the IFS, the Indian Postal Service, the five Accounts services and Indian Revenue Service (IT) to the 13 engineering services under the railways, CPWD, telecom, power, water and defence forces. (PTI)

This move comes courtesy 7th Pay Commission panel chairman, Justice (retired) A K Mathur calling for an end to the dominance of IAS officials. However, there were divergent views in the panel on ending the IAS superiority. Under the scanner especially was the joint secretary-and-above-level positions in the central staff. The 7th Pay Commission threw up the data: out of a total of 91 secretary level posts, 73 (80%) were occupied by IAS; out of 107 additional secretary level posts, 98 (92%) were with the IAS and of 391 joint secretary level posts, 249 (64%) were with the IAS. (PTI)

The 7th Pay Commission said IAS officers get two extra increments at promotion stages and it wanted to extend the same to the IPS and the Indian Forest Service. Other all-India services and central services (Group A) are not getting proper representation either. The IAS officers always had a two-year edge compared to other services. (PTI)

The solution that the 7th Pay Commission panel unveiled said that all personnel who have put in 17 years of service should be given equal opportunity for central staff. The panel was overwhelmed by the reactions of Group A Services, who demanded that the services should have equal opportunities to man the senior-most posts and it should not be the preserve of a small group. (PTI)

Source : FinancialExpress

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Highlights

• Higher salaries and arrears received may increase tax slab
• Tax Laws provide relief to employees due to delay in receipt of arrears
• The tax relief can be claimed under Section 89(1)

In Seventh Pay Commission bonanza, lakhs of central government employees will soon receive higher salaries and arrears in one go. This may result in an increase in the tax slab of many employees as they will receive arrears from January 1, 2016.

Suppose an employee’s annual salary is Rs 9.50 lakh and receives Rs 1 lakh as arrears, of which Rs 50,000 is for the previous fiscal year. His/her tax slab will change. The total income for this year will be Rs 10.50 lakh as against Rs 10 lakh (including the arrears of this year). Income of individuals above Rs 10 lakh is taxed at the rate of 30 per cent while income between Rs 5 lakh and Rs 10 lakh is taxed at the rate of 20 per cent.

So will employees have to pay an extra tax? No.

There are provisions which provide tax relief to employees due to delay in the receipt of the arrears.

“If an employee or his family receives pension arrears or salary arrears, he or she can claim tax relief under Section 89(1). This Section makes sure you don’t end up paying higher tax due to moving up a tax slab from receipt of arrears. Or because tax slab rates in the year of receipt are higher as compared to the year to which arrears belong to,” says Preeti Khurana, chief editor of Cleartax portal.

How the tax relief is calculated

The tax break is arrived at by recalculating the tax for the both the years in which the arrears are received and the year to which arrears pertain to.

1) Calculate the tax payable on the total salary including and excluding the arrears in the year in which it is received. Calculate the difference between the two and assume it is ‘A’

2) Calculate the tax payable on the total salary including and excluding the arrears for every year for which the arrear relates to and sum it up. Calculate the difference between the two and assume it as ‘B’.

3) If ‘A’ is more than ‘B’, the employee will get tax break equivalent to ‘A’.

How it can be claimed

To avail the tax break, it is mandatory under the income tax laws to file Form 10E. The form includes details like the PAN, arrear and advance salary details. This form has to be uploaded on the website of the Income Tax Department.

Source : http://profit.ndtv.com/

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Unhappy with 7th Pay Commission hike, government employees to go on strike on July 11

The 7th Pay Commission report that received a nod from the Cabinet chaired by Prime Minister Narendra Modi, will levy a pay hike of 23.55%.

Nearly 32 lakh central government employees have announced they will be going on a strike starting July 11, protesting against the 23.55% salary hike approved by the Cabinet on Wednesday, Zee Business channel news frash indicated.

Earlier in the day the Cabinet approved the recommendations put forth by the 7th Pay Commission panel, which will impact the salaries of one crore government employees.

Under the final approval, the basic salary of government employees will be hiked by 15% and the overall 7th Pay Commission pay hike stands at 23.55%. The central government employees, unhappy with the rate of pay hike had warned earlier that they will stage a strike on July 11, demanding a pay rise of atleast 30%.

At current levels, the salary hike is the lowest in 70 years, but a senior government official stated tight fiscal situation as the reason, stating that a provision to increase it to 18-20% was still open.

On July 4, M Krishnan, Secretary General of the Confederation of Central Government Employees and Workers issued a notice to the employees who are member and affiliated organisations regarding the pursuance of an indefinite strike from July 11 2016.

Krishnan had earlier said that if the government adopts delayed tactics or issue unilateral orders rejecting our demands, then confrontation shall become inevitable.

The Confederation of Central Government Employees & Workers on June 27, also put up a notice calling for an indefinite strike from July 11 and demonstrations and rallies in front of all important government offices and centres from July 4 to July 10.

Source: dnaindia

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The pay panel had in November last year recommended 14.27 per cent hike in basic pay at junior levels, the lowest in 70 years.

The Union Cabinet on Wednesday approved the recommendations made by the 7th pay commission, news agency ANI reported.

The details of the approval, which will be made public soon, is likely to see a higher increase in the basic pay than the nearly 15 per cent recommended by the 7th Pay Commission for over 1 crore government employees and pensioners.

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

After considering the increase proposed in allowances, the hike in remunerations comes to 23.55 per cent.

The 7th Pay Commission report will be effective from January 1, he said, adding that the Cabinet will decide if the arrears for the six months have to be paid in one go or in installments.

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