7th Pay Commission: Features & Key Highlights

After a certain period, the Central Government engages the Pay Commission to revise the salary structure of around 5.5 million Central Government employees. Since Independence, the Central Government has set up 7 Pay Commissions (latest one) that review and recommend changes in the emolument structure of defence and civil personnel of the Government of India.

Want to know more about Pay Commission and, more importantly, the latest 7th Pay Commission? Read along!

A Pay Commission is an administrative system and mechanism of the Central Government that reviews and examines existing salary structure and recommends changes (in pay, allowances, benefits, bonuses and other facilities) for civil employees and military forces. 

Additionally, a Pay Commission reviews rules regarding bonuses after assessing performances and productivity of employees. The activity of the Pay Commission also includes examining existing pension schemes and other retirement benefits.

The Pay Commission makes a recommendation only after evaluating the economic condition and accessible sources of our country. This Commission primarily focuses on the Central Government employees. 

As already stated, around 7 Pay commissions have been set up since 1947. The latest, i.e., Seventh Pay Commission, was set up on 8th February 2014. The Central Government forms a Pay Commission after every 10 years to revise the pay structure of Central Government employees. 

The Government provides 18 month’s window (from the date of its constitution) to submit a recommendation via a report. This Commission may send interim reports on any matter after the finalization of recommendations. Since this is not a constitutional body, the Central Government may accept or reject recommendations. However, the State Government usually adopts recommendations and implements them after certain modifications.  

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• The Government set up 7th Pay Commission during the rule of the UPA government under the chairmanship of Justice Ashok Kumar Mathur.
• There were 7 other members from different fields who collectively submitted a report on 19th November 2015.
• Their recommendations came into effect from 1st January 2016. This report focuses on the emoluments structure, allowances and conditions of services of individuals engaged in Armed Forces.
• The Ministry of Finance, under the Union Cabinet chaired by PM Narendra Modi, approved revised recommendations on allowances further on 28th June, 2017 which shall come into effect from 1st of July. 2017.

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Here is a list of key highlights and features of 7th Pay Commission -

New Pay Matrix

The 7th Pay Commission has recommended dissolving existing Pay Bands and Grade Pay instead of introducing a new Pay Matrix. The Central Government approved this recommendation.  Previously, authorities determined the status of an employee by grade pay, which the level will evaluate in the Pay Matrix from now on. They designed several Pay Matrixes for different groups such as Defense Personnel, Civilians, Military Nursing Services. The objective of organizing various Pay Matrixes is the same.    

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Minimum Pay

This Pay Commission has increased the minimum pay from ₹7000 to ₹18000 per month. Now, the lowest starting salary will be ₹18000 (for newly recruited). On the other hand, a freshly recruited class 1 officer will be ₹56,100. This salary structure shows a compression ratio of 1:3.12, meaning a class 1 officer (on direct recruitment) will have a salary that is three times more than an entrant at the lowest level.

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Rate of Increment

This 7th Pay Commission has decided to keep the rate of increment at 3%. This decision will help employees in the long run on account of higher basic pay as they will get an annual increment of 2.57 times in future than the present time.

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New Structure

Previously there were several levels at pay structure; a new structure subsumed all of these. The Central Government has approved the Index of Rationalization and collectively decided to offer a minimum pay in each level of Pay Matrix based on responsibility, accountability and increasing role as per hierarchy.

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House Building Advance

Cabinet has approved the recommendation of 7th Pay Commission to raise the ceiling of House Building Advance from ₹7.50 lakh to ₹25 lakh. Further, to reduce the burden, the Cabinet has retained four interest-free advances such as TA on transfer or tour, TA for the deceased employee's family, and advances for medical treatment. However, all other interest-free advances are not functional anymore.

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Monthly Contribution

The 7th Pay Commission recommended raising the amount of monthly contribution towards the Central Government Employees Group Insurance Scheme (CGEGIS). However, the Cabinet did not accept this recommendation and decided to keep the rate at the existing amount. Thus, the net salary of employees will increase by ₹1470. Additionally, the Cabinet has proposed to the Finance Ministry to introduce a customized group insurance scheme for personnel engaged with the Central Government with high-risk cover and low premium. 

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Fitment Factor

Fitment factor is one of the main features of 7th Pay Commission. Here, a fitment factor of 2.57 will be applicable in all levels of Pay Matrices. After considering DA, the salary or pension of Government employees or pensioners will increase at least 14.29% from 1st January 2016.

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Subsuming of Allowances

After examining around 197 allowances, this Commission has recommended demolishing 53 allowances and subsuming 37 allowances. As this significant change in the prevailing provisions of allowances can impact Government employees, the Cabinet has decided to set up a committee (presided by Finance Secretary) to review the recommendation of 7th Pay Commission on allowances.

This Committee will get 4 months to examine the recommendation and submit reports regarding this. Until then, all the prevailing allowances will keep operating under existing rates.

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Other Decisions

Apart from the pointers mentioned above, the 7th Pay Commission proposed a recommendation that impacts employees, including Defence and Combined Armed Police Forces (CAPF). These are as follows -

Gratuity

The Gratuity ceiling increased from ₹10 lakh to ₹20 lakh. Further, when DA rises by 50%, the ceiling of Gratuity will also enhance by 25%.

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Military Service Pay

7th Pay Commission has recommended revising rates of Military Service Pay from ₹1,000, ₹2,000, ₹4,200 and ₹6,000 to ₹3,600, ₹5,200, ₹10,800 and ₹15,500 respectively personnel involved in different categories of Defence Forces.

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Subsuming of Leave

Special Disability Leave, Hospital Leave, Sick Leave were subsumed into a new Leave named Work Related Illness and Injury Leave’ (WRIIL). The Commission has recommended ensuring all allowances and pay in full to the employees during hospitalisation due to many reasons related to WRIIL.

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Ex-Gratia Lump Sum Compensation

This Commission has increased the Ex-Gratia Lump Sum Compensation from ₹10-20 lakh to ₹24-45 lakh for personnel involved in various civil and defence forces categories. Next of Kin will get this amount.

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Terminal Gratuity

This 7th Pay Commission recommended that officers may get permission to exit the Armed Forces at any time between 7 years to 10 years of service. Additionally, they will receive a   Terminal gratuity equal to 10.5 months of reckonable emolument.

Regarding the recommendations of 7th Pay Commission, the Cabinet has decided to work on certain factors. These are as follows -

• The Cabinet will organize two committees, one of which will focus on suggesting measures to streamline the implementation of the National Pension Scheme. The other will scrutinize the anomalies that may arise from the recommendation of the Commission’s report.
• The concerned ministries may look into the administrative issues, issues which the Commission has not been able to resolve, individual post or cadre specific.

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When an officer becomes invalidated due to disability attributed to or aggravated by Military Service, that officer will receive a grant of Disability Pension. 

This pension consists of two elements, namely Disability element and Service element. This service element is equal to the retiring pension as determined. Disability element for 100% disability is set at 30% of the last drawn salary or ₹3510 per month. If the disability is less than 100%, the amount will reduce accordingly.

This Disability Pension (including disability element and service element) of Armed Forces are exempted from income tax (as per the circular on 24th June 2019).

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The above discussion covers every detail on the 7th Pay Commission. Read the information and enjoy the benefits offered through the 7th Pay Commission.