Eighth Pay Commission
There is good news for lakhs of central government employees and pensioners. Recently the Central Government has approved the Terms of Reference (ToR) for the 8th Pay Commission. This means that there may be a major change in the salary and pension structure of government employees in the coming months.
This commission will be headed by Justice (retired) Ranjana Desai. The Pay Commission will submit its recommendations to the government in the next few months. Before this, this commission will also talk to employees, pensioners and other concerned parties and take their opinion.
Salary increase will be decided by fitment factor
Like every pay commission, this time too the fitment factor will play the most important role in deciding the salary. If we understand it in simple language, the fitment factor is the number by which the old basic salary is multiplied to determine the new basic salary. According to the reports of brokerage houses Kotak Institutional Equities and Ambit Capital, this time the fitment factor may be between 1.8 to 2.46.
Kotak has estimated that if the factor of 1.8 is implemented, the basic salary of level-1 employees (such as peons or attendants) may increase from Rs 18,000 to Rs 32,400. Although this seems like a big increase of 80%, the actual increase will be less than this because when the new salary is implemented, Dearness Allowance (DA) will be reduced to zero.
DA will reset to zero?
Currently, Level-1 employees get a total of around Rs 29,000 including 58% DA and House Rent Allowance (HRA). When DA is reset to zero, then their basic salary will increase i.e. now DA will not be received separately, but will become a part of the salary. This will not reduce the net salary of the employees, but will strengthen the salary structure. With the increase in the new basic salary, things like HRA, transport allowance and future pension will also be decided on the same basis.
Pensioners will also get benefits
The recommendations of the Pay Commission will not be limited to salaried employees only. Pension of pensioners will also be recalculated on the basis of new basic pay. This means that when the basic salary increases, the pension amount will also increase in the same proportion.
What will change for employees
Reducing DA to zero does not mean that the earnings of employees will decrease. The only difference will be that the amount which was earlier given separately as DA, will now be included in the basic salary. This will not only strengthen the salary structure of every month, but the increment and pension received in future will also be higher.