The Modi government has notified the 7th Pay Commission report, which means Central government employees will get the new pay boost in their August salaries. The Union Cabinet had earlier cleared the recommendations of the 7th Pay Commission headed by A K Mathur on June 29 in respect of the hike in basic pay and pension. 4.8 million central government employees and 5.2 million pensioners will get the increased payout for their August salaries.

The decision on 7th Pay Commission suggestions relating to allowances has been referred to a Committee headed by Finance Secretary. The recommendations on Allowances (except Dearness Allowance) will be referred to the Committee comprising of Finance Secretary and Secretary (Expenditure) as Chairman and Secretaries of Home Affairs, Defence, Health and Family Welfare, Personnel and Training, Posts and Chairman, Railway Board as Members.

There shall be two dates for the grant of increment, 1st January and 1st July of every year, instead of existing date of 1st July, provided that an employee shall be entitled to only one annual increment on either one of these two dates depending on the date of appointment, promotion or grant of financial up-gradation.

Rate of increment has been retained at 3 percent. This will benefit the employees in future on account of higher basic pay as the annual increments that they earn in future will be 2.57 times than at present.

The additional financial impact on account of implementation of 7th Pay Commission suggestions in 2016-17 will be Rs. 1,02,100 crore. There will be an additional implication of Rs. 12,133 crore on account of payments of arrears of pay and pension for two months of 2015-16.

Brief snapshot of what this means for government employees.

1. There will be an overall hike of 23.55 per cent in the basic salary and allowances.

2. The 23.55 per cent overall hike in salaries, allowances and pension would entail an additional annual burden of Rs 1.02 lakh crore, or nearly 0.7 per cent of the GDP.

3. Entry level pay will be raised to Rs 18,000 a month from the current Rs 7,000.

4. The maximum pay has been fixed at Rs 2.5 lakh a month, up from the current Rs 90,000.

5. This is the lowest pay hike for government employees, in terms of a pay panel report, in the last 70 years.

6. While the Budget for 2016-17 fiscal did not provide an explicit provision for implementation of the 7th Pay Commission, the government had said the once-in-a-decade pay hike for government employees has been built in as an interim allocation for different ministries.

7. Experts said the higher payout will boost consumption, especially of consumer durables and services.

By Premji