Seventh Pay Commission

Central Pay Commissions are periodically constituted to go into various issues of emoluments’ structure, retirement benefits and other service conditions of Central Government employees and to make recommendations on the changes required. The first pay commission was established on January , 1946, under the chairmanship of Srinivasa Varadachariar. Seventh pay commission was constituted in 2013 under the chairmanship of Justice A.K.Mathur. Commissions recommendation will be implemented from Jan 1,2016 onwards.

Seventh pay commission has been given following terms of reference:

• To examine, review, evolve and recommend changes that are desirable and feasible regarding the principles that should govern the emoluments structure including pay, allowances and other facilities/benefits, in cash or kind, having regard to rationalization and simplification therein as well as the specialized needs of various Departments, agencies and services.

• To examine, review, evolve and recommend changes that are desirable and feasible regarding principles that should govern the emoluments structure, concessions and facilities/benefits, in cash or kind, as well as retirement benefits of personnel belonging to the Defence Forces, having regard to historical and traditional parities, with due emphasis on aspects unique to these personnel.

• To examine the existing schemes of payment of bonus, keeping in view, among other things, its bearing upon performance and productivity and make recommendations on the general principles, financial parameters and conditions for an appropriate incentive scheme to reward excellence in productivity, performance and integrity.

• To review the variety of existing allowances presently available to employees in addition to pay and suggest their rationalization and simplification, with a view to ensuring that the pay structure is so designed as to take these into account.

• To examine the principles which should govern the structure of pension and other retirement benefits, including revision of pension in the case of employees who have retired prior to the date of effect of these recommendations, keeping in view that retirement benefits of all Central Government employees appointed on and after 01.01.2004 are covered by the New Pension Scheme (NPS).

They have to make their recommendations keeping in mind the economic conditions in the country and need for fiscal prudence; the need to ensure that adequate resources are available for developmental expenditures and welfare measures; the likely impact of the recommendations on the finances of the State Governments, which usually adopt the recommendations with some modifications; the prevailing emolument structure and retirement benefits available to employees of Central Public Sector Undertakings; and the best global practices and their adaptability and relevance in Indian conditions.

Recommendations of Central pay commission are applicable on following category of employees; Central Government employees-industrial and non-industrial; Personnel belonging to the All India Services; Personnel of the Union Territories; Officers and employees of the Indian Audit and Accounts Department; Members of regulatory bodies (excluding the Reserve Bank of India) set up under Acts of Parliament; and Officers and employees of the Supreme Court.

Seventh pay commission while looking into various conditions mentioned has given its recommendation. Most important recommendations are given below:

• Based on the Aykroyd formula, the minimum pay in government is recommended to be set at ¹ 18,000 per month.

• 2,25,000 per month for Apex Scale and ¹ 2,50,000 per month for Cabinet Secretary and others presently at the same pay level.

• Grade pay has been dispensed with and a new pay matrix has been designed. Grade Pay has been subsumed in the pay matrix. The status of the employee, hitherto determined by grade pay, will now be determined by the level in the pay matrix.

• The rate of annual increment is being retained at 3 percent.

• Performance benchmarks for Modified Assured Carrer Progression have been made more stringent from “Good” to “Very Good”.

• Short Service Commissioned Officers will be allowed to exit the Armed Forces at any point in time between 7 and 10 years of service, with a terminal gratuity equivalent of 10.5 months of reckonable emoluments.

• The Commission has recommended abolishing 52 allowances altogether. Another 36 allowances have been abolished as separate identities, but subsumed either in an existing allowance or in newly proposed allowances. Allowances relating to Risk and Hardship will be governed by the proposed Risk and Hardship Matrix.

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