Cabinet clears 23.5% hike in pay for Central govt. staff

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The Union cabinet has announced an overall increase of 23.5 per cent for over one crore government employees and pensioners in line with the Seventh Pay Commission’s recommendations that will benefit 4.2 million central government employees and 5.2 million pensioners. The new salaries and pensions will be effective from January 1, 2016. The arrears for the six months will be disbursed during the current financial year (2016-17) itself.

The total financial impact of  Seventh Pay Commission’s recommendations will be Rs.1.02 trillion. Of this, the increase in pay would account for Rs.39,100 crore, increase in allowances for Rs.29,300 crore and increase in pension for Rs.33,700 crore. Of this, Rs. 60,608 crore will be borne by General Budget and Rs. 24,325 crore from Railway Budget.

Maximum and minimum salary :

According to the commission’s recommendations, the minimum monthly pay has been fixed at Rs.18,000 and the maximum at Rs.2.5 lakh for the cabinet secretary, the country’s senior-most civil servant.The starting salary for new recruits at the lowest level has been raised to Rs. 18,000 from Rs. 7,000 per month. Freshly recruited Class I officers will receive Rs.56,100.

Gratuity ceiling raised :

Gratuity has been increased from Rs 10 lakh to Rs 25 lakh and House Building Advance was raised from Rs 7.5 lakh to Rs 25 lakh. The ceiling on gratuity will increase by 25 per cent whenever dearness allowance rises by 50 per cent.

New pay matrix :

The Union Cabinet has approved a new pay matrix as recommended by the Pay Commission and dispensed the present system of pay bands and grade pay. Employee status which was till now determined by grade pay, will now be determined by the level in the pay matrix. Separate pay matrices have been drawn up for civilians, defence personnel and for Military Nursing Service with all existing levels subsumed in the new structure.

What percent of GDP is spent on Pay, Allowances and Pension ?

Pay, Allowances and Pension (PAP) constitutes around 2.8 per cent of GDP now the Seventh Pay Commission’s recommendations  will lead to an increase in 0.65 per cent of GDP on PAP although it is less than 6th PC, which led to an increase in 0.77 per cent of GDP on PAP. 7.8 per cent of total expenditure of the Union Government is spent on salaries while 4.6 per cent of total expenditure is spent on pensions.

Who will be benefitted ?

There are around 47 lakh central government employees, in which armed forces happen to be the biggest employer, with 14 lakh employees. There are about 52 lakh  Pensioners in the country. Of the 52 lakh Central Government pensioners, 46.5 per cent belong to defence personnel while 26.5 per cent pensioners belongs to Indian railways.

Comparing government salaries with private sector :

The minimum salary to be paid to a central  government  emplolyee is  higher than in the private sector as for example, a general helper  lowest ranked employee in the government earns Rs. 22,579 per month in government job but around Rs. 9,000 in private job but if we compare the salaries of high level excutives it is nowhere comparable to their counterparts in the private sector.

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