7th Pay panel report at a glance

Two out of the last three times, the BSE Sensex fell on the day following submission of the 7th Central Pay Commission report, data compiled by BS Research Bureau showed. The BSE Sensitive Index came into use on January 1, 1986, the same day as the 4th Pay Commission recommendations took effect. The Sensex has since seen three pay panels.

    The government has cleared the terms of reference for the seventh pay commission for central government employees, but the states, which usually follow central norms in fixing pay scales for their employees, want to be adequately compensated for the hit they would have to take on their exchequer.

GENERAL RECOMMENDATIONS

• Recommended date of implementation is January 1, 2016
• Minimum monthly pay set at Rs 18,000
• Maximum monthly pay Rs 2.25 lakh (apex scale), Rs 2.50 lakh (Cabinet secretary and equivalent)
• Pay bands, grade pay abolished, new pay matrix designed
• Rate of annual increment retained at 3%
• Performance-related pay recommended for all categories

FINANCIAL IMPLICATIONS

• Total financial impact for FY2016-17: Rs 1.02 lakh crore
• Impact on FY17 Union Budget: Rs 73,650 crore;Impact on Rail Budget: Rs 28,450 crore
• Overall increase in pay, allowances, pensions: 23.55 per cent
• Increase in pay: 16%; Increase in allowances: 63%, Increase in pension: 24%
• Expenditure-GDP ratio to be impacted by 0.65% points vs 0.77% for 6th Pay Commission

DEFENCE

• Military service pay increased across board
• Short-service commission (SSC) officers exit at 7-10 years, with terminal gratuity equivalent of 10.5 months
• SSC officers entitled to a fully-funded one year Executive Programme/M.Tech
• Revised formulation for lateral entry/resettlement of defence forces personnel
• Parity recommended between field and headquarters staff for similar functions
• Systemic change in cadre review for Group A officers recommended

ALLOWANCES

• Recommends abolishing 52 allowances altogether
• Another 36 allowances abolished as separate identities, but subsumed in existing allowances
• Allowances relating to risk and hardship to be governed by the proposed Risk and Hardship Matrix
• HRA recommended to be paid at the rate of 24%, 16%, 8% of new basic pay for class X, Y and Z cities, respectively
• HRA to be revised to 27%, 18%, 9% respectively, when DA crosses 50%, and further revised to 30%, 20%, 10% when DA crosses 100%
• Emphasis placed on simplifying the process of claiming allowances

INSURANCE SCHEMES AND MEDICAL FACILITIES

• Substantial increase for central government employees group insurance schemes' monthly deduction and insurance amount
• Introduction of a Health Insurance Scheme for employees and pensioners recommended

PENSION, COMPENSATION AND GRATUITY

• Revised OROP-type pension formulation for civil, defence and paramilitary employees
• Enhancement in the ceiling of gratuity from Rs 10 lakh to Rs 20 lakh
• Recommends reverting to a slab-based system for disability element
• Revision of rates of lump sum compensation for next of kin to be applied uniformly to defence, civil, paramilitary personnel
• Paramilitary personnel to be accorded martyr status in case of death in line of duty
• Strong pension grievance redressal mechanism recommended

  The notes are also a first for the Pay Commissions, set up every 10 years by the central government to revise the pay and allowances of central government employees. In the fifth Pay Commission, economist Suresh Tendulkar had put in a dissent note but it was on a macro theme suggesting a pruning of the bureaucracy and relating wages to performance.