Central Pay Commission

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This is a collection of articles archived for the excellence of their content.

Seventh Pay Commission (implemented in 2016)

The Times of India, Jun 30 2016

Rs 85,000 crore bonanza for 1 cr central govt staff & pensioners

A big pay and pension hike that is expected to benefit 47 lakh central government employees and 53 lakh pensioners, and is also expected to spur demand, was cleared by the Union Cabinet. With a good monsoon expected in 2016-17, it could prove to be a case of double delight for the economy . After taking into account dearness allowances at the prevailing rate, the salary and pension of all government employees, including pensioners, will increase by at least 14.3% as on January 1, 2016 and could go up to 23% in upper brackets.

The fiscal impact of the implementation of the pay panel's recommendations would be Rs 72,800 crore every ye ar. In the current fiscal year, it is expected to be Rs 84,933 crore. This includes the outgo on arrears with the implementation date being January 1, 2016. The government said it had planned for the outgo.

The government appro ved recommendations of the Seventh Pay Commission on pay and pension but deferred proposals on allowances, which will be examined by a committee headed by finance secretary Ashok Lavasa.

Pending the panel's deci sion, allowances will continue at existing rates. The commission called for scrapping several allowances but employee unions asked for this to be reviewed. The recommendations of the Pay Commission with respect to pay and pension have been accepted by and large by the government.And those recommendations will be implemented with effect from January 1, 2016, and the arrears would also be paid in this year,“ finance minister Arun Jaitley said.

The minimum pay has been increased from Rs 7000 to 18,000 per month. Starting salary of a newly-recruited employee at lowest level will now be Rs 18,000 whereas for a Class I officer it will be Rs 56,100. For a secretary-level officer the salary will increase from Rs 90,000 to Rs 2.25 lakh and for the cabinet secretary at Rs 2.5 lakh a month. The government has accepted the Pay Commission recommendation of a fitment factor of 2.57 (the starting pay will be 2.57 times what was prevailing on 01.01.2006) which will be applied across all pay scales. Gratuity ceiling has been raised from from Rs 10 to 20 lakh.

The Pay Commission had examined a total of 196 existing allowances and recommended that 51 of them be abolished and 37 should be subsumed.

Lavasa said there was also a recommendation on abolishing interest bearing allowances. He said the government has accepted the recommendation of abolishing advances on motor cars and motorcycles but interest bearing house building loans and computers will continue. The ceiling on the house building loan has been raised to Rs 25 lakh from Rs 7.5 lakh which is expected to provide a huge boost to the housing sector. In order to ensure that no rdship is caused to employ hardship is caused to employees, four interest-free advances for medical treatment, TA on tour and transfer, TA for family of deceased employees and LTC have been retained.All other interest-free advances have been abolished.

The 7th Pay Commission headed by retired Justice A K Mathur had recommended a 23.55% increase in pay and allowances and a 24% rise in pensions for all central government employees. The increase of 23.55% included a 16% hike in basic pay and an increase of 63% in allowances. Jaitley said the Pay Commission had engaged IIM Ahmedabad to compare the salaries of government employees and the private sector.

“After considering all relevant factors the commission is of the view that the minimum pay recommended at Rs 18,000 per month with effect from 1.1. 2016 is fair and reasonable and along with allowances and facilities would ensure a decent standard of living for the lowest ranked employee central government,“ the FM quoted the pay commission as saying.

“Government salaries have to come to at a respectable level so that the government is able to attract the best talent. Not necessarily in civil services alone but also other services and therefore irrevocable consequence of this would be a pressure on the Budget along with OROP recommendations,“ Jaitley said.

The cabinet also decided to set up two separate committees to suggest measures for streamlining the implementation of National Pension System (NPS) and to look into anomalies likely to arise out of implementation of the Commission's report.

Comparison with the private sector

The Times of India, Jun 30, 2016

Ruchika Chitravanshi & Rica Bhattacharyya | ET Bureau

Top jobs in India's bureaucracy just became a bit more lucrative with Cabinet approval for salary increases recommended by the Seventh Central Pay Commission, but they're still no match for what corner-office occupants of private companies are paid. The Cabinet Secretary, the government's top civil servant, will now draw Rs 2.5 lakh a month.

In comparison, the chief executive officer in a Rs 1,000 crore company will get a "minimum Rs 10 lakh a month and this could easily go up to Rs 25 lakh a month," said R Suresh, managing director of RGF Executive Search. To be sure, bureaucrats get benefits such as bungalows with gardeners and security guards in central Delhi, among others. Comparisons are only of basic pay and exclude perks.

"The lure of the top IAS (Indian Administrative Service) jobs goes beyond money. It is a highly prestigious opportunity where you are part of decision-making at a much macro level and creating a social impact," said a former IAS officer who did not wish to be identified. "There is a stark difference from the private sector, keeping in mind that bureaucrats manage much bigger assets for the government.

However, bureaucrats get several perquisites such as housing in prime location, travel, medical, pension, which even private sector CEOs get, but that zamindari style is not there," said Suresh of RGF Executive Search. However, he said that with huge salaries comes big pressure. In the private sector you have to be at the cutting edge of things all the time. The pressure to perform and project that you are performing is very high, he added. According to a study by the Indian Institute of Management, Ahmedabad, commissioned by the Seventh Pay Commission, compensation of a CEO is positively related to profit. The study said that compensation strategies of companies and their ability to pay are also influenced by factors such as its prospects in the market and assessments by prospective employees of its viability and success.

The IIM Ahmedabad report suggested the government has to be highest paymaster for roles that are important to society, the nation or have long-term value. Besides, it mentioned that pay commissions review emoluments once in adecade but corrective action may be required more frequently. "Private sector pay was low till the 1980s, but post liberalisation, compensation has taken off significantly, increasing more than 10-fold in 25 years," said K Sudarshan, managing partner at EMA Partners, executive search firm.

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