JANUARY 12, 2016

By Samir Kumar Sinha

1. THE Seventh Central Pay Commission (7^th CPC) has recommended 14.29% increase in the basic pay and pension for civil employees with effect from 01.01.2016 after 100% neutralization of the expected Dearness Allowance(DA) @ 125% as on 01.01.2016. Also, there are recommendations for changes in certain allowances. Key highlights of recommendations have already been published on this website on 19.11.2015. Accordingly, government has set up an Implementation Cell for processing and implementing the accepted recommendations of the7^th CPC.

2. As per media reports, most of the employees are not happy with the recommendation since there was expectation for hefty increase in salary. Also, their representations for more facilities were not considered. Obviously, if the expectation is not fulfilled, there is disappointment.

3. The 7^th CPC was mandated by its terms of reference to examine, review and recommend changes in the principles that govern the emoluments structure for a number of employees' categories. Earlier the thrust of all the previous Pay Commissions had been to propose an improvement in the pay structure by way of ‘simplification and rationalisation'. If this aspect is considered, it can be said that recommendations by the 7^th CPC is the best among all Pay Commissions' recommendations inspite of certain anomalies.

4. Although 14.29% increase in the basic pay appears to be small, overall increase in the gross emoluments is satisfactory. This can be understood by the following example in the case of minimum pay recommended by the 7^th CPC with effect from 01.01.2016:

5. From the above table, it is clear that although HRA rate has been reduced by 6%, HRA amount has been increased by 105.71%. After 100% neutralization of Dearness Allowance (DA), overall increase in the gross emoluments is 23.28%. Also, the 7^th CPC has retained the annual increment @ 3% of the basic pay which means that there is also substantial increase in the annual increment amount since basic pay has been increased by 157.14%. As such, proposed structure of pay for civil employees is satisfactory.

6. The 7^th CPC has recommended a revised pension formulation for civil employees who have retired before 01.01.2016(expected date of implementation of the 7^th CPC recommendations). Such pensioners shall first be fixed in the Pay Matrix being recommended by the 7^th CPC on the basis of Pay Band and Grade Pay at which they retired, at the minimum of the corresponding level in the pay matrix. This amount shall be raised to arrive at the notional pay of retirees, by adding number of increments he/she had earned in that level while in service at the rate of 3 percent. Fifty percent of the total amount so arrived at shall be the new pension.

7. As per the second calculation, current basic pension shall be multiplied by the fitment factor of 2.57 to ascertain the revised pension at an alternate value. The pensioner will get the higher of the two formulations. This method of calculation for pension will bring about complete parity of the past pensioners with the current retirees.

8. In the case of fixation of basic pay for civil employees, only fitment factor of 2.57 has been considered to ascertain the revised basic pay. If the 7^th CPC would have considered the similar recommended formulations for pensioners in respect of fixing the civil employees in the recommended Pay Matrix on the basis of current Pay Band and Grade Pay, there would have been more benefits to civil employees.

9. As mentioned in para 5.1.49 of the report, the 7^thCPC has suggested that India should have a permanent Remuneration Authority. Contents of para 5.1.49 are as mentioned below:

"The Commission, after its interaction with the authorities of Australia and New Zealand feels that India should have a permanent Remuneration Authority that should review the pay structure based on job roles evaluation, remunerations prevailing in the market for comparable job profiles, general working of the economy etc within a budgetary outlay. With this, the pay structure could be revised periodically, at more regular intervals, say annually, without putting an undue burden on the public exchequer every ten years, as is the case now. Such a periodic review may have many possible fallouts: impact of revision of wages could be easily absorbed in each year's budget and quicker remediation of anomalies would take place, leading to greater employee satisfaction. In the backdrop of annual revision, the present system of biannual revision of DA could also be dispensed with."

10. The aforesaid observations of the 7^th CPC is remarkable. If Planning Commission can be replaced with NITI(National Institution for Transforming India) Aayog, Pay Commission may also be replaced by a permanent Remuneration Authority as suggested by the 7 th CPC. After recommendations of Pay Commission, Implementation Cell and, thereafter, Pay Anomaly Committee are set up. In view of the above mentioned observation of the 7^th CPC, it is better to set up a permanent Remuneration Authority instead of setting up three entities.

11. Let us hope that the government will implement the recommendations of the Seventh Central Pay Commission(7^th CPC) in toto.