7th Pay Commission vs. 6th Pay Commission: Comparative Analysis

Headed by Justice AK Mathur; the 7^th Pay Commissions has submitted its report to Finance Minister Arun Jaitley. The report has put forth several recommendations such as increase in pay and allowances of 23.55%, a 24% rise in pensions and one-rank-one-pension for central government employees as well as paramilitary personnel along with host of other changes. The changes are likely to be implemented from 1^st January 2016, and will affect 47 lakh central government employees and 52 lakh pensioners while bearing financial implication of Rs 1.02 Lakhs to the exchequer.

While, this blockbuster announcement has put a smile on the faces of central government employees, it is important that we evaluate and understand the proposed changed in light of the existing pay structure suggested under the 6^th Pay Commission.

Minimum and Maximum Salary

The 7^th Pay Commission has adopted Aykroyd formula to determine the minimum salary for central government employees. According the panel’s recommendation the minimum salary for central government employees has been set at Rs 18,000 compared to Rs 6,660 under the current system. Similarly, the maximum salary has also been fixed at Rs. 2,25,000 per month for Apex Scale & Cabinet Secretary and others presently at the same pay level. Previously the maximum salary package stood at Rs 80,000.

Seventh Pay Commission Salary Structure

One of the key changes suggested by the 7CPC has been the ‘New Pay Structure’, under which the existing system of pay bands and grade pay has been dispensed with and a new pay matrix has been designed. The move is likely to bring about more transparency and solve concerns raised regarding the grade pay structure of 6^th Pay Commission. Comparative details between 6CPC and 7CPC Pay structure are given in the table below:

Annual Increments

The annual increment rate has also been hiked to 3% from the existing 2.5%.

Military Service Pay

Military Service Pay – the compensation for the various aspects of military service attributed to Defence forces personnel only; has also been hiked and now includes officers of all ranks up to and inclusive of Brigadiers and their equivalents. The comparative details of hike in Military Pay are tabulated below:

House Rent Allowance

The House Rent Allowance granted to central government employees has also been increased; it will now be paid at the rate of 24%, 16% and 8% of the new Basic Pay for Class X, Y and Z cities respectively. The 7^th CPC also suggested that the HRA rate will be hiked to 27%, 18% and 9%, if the DA crosses 50%; and further revision to 30%, 20% and 10%, when DA crosses 100%.

Central Government Employees Group Insurance Scheme (CGEGIS)

The Central Government Employees Group Insurance Scheme (CGEGIS) is national level insurance scheme for all the government employees. The rates and respective contribution has been hiked by 7^th Pay commission as follows:

Health Insurance Scheme

The 7^th Pay Commission has also recommended Introduction of a Health Insurance Scheme to replace the current Central Government Health Scheme (CGHS) for Government employees.

One Rank One Pension (OROP)

The 7^th Central Pay Commission has also advised implementation of a new pension scheme on lines of one-rank-one-pension (OROP) model. Under this new pension scheme, the pensioners will be first included in the new Pay Matrix being suggested by the panel on basis of Pay Band and Grade Pay at which they retired, and their pension will be calculated on basis of current pay scale. The move is aimed at bringing about parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.

Enhancement in Gratuity

The 7^th Pay Panel has also prescribed enhancement of the Gratuity pay for central government employees from the existing Rs 10 lakh to Rs 20 lakh.

Performance Pay

Emphasising on the need of result oriented approach in government machinery; the pay panel has also suggested inclusion of Performance Related Pay (PRP) for all the central government employees. Under this, the employees will be paid performance incentive as per their rating on basis of quality Results Framework Documents, reformed Annual Performance Appraisal Reports and some other broad Guidelines.

Advances

The 7^th Pay Commission has abolished all non-interest bearing advances being offered to the central government employees, apart from Personal Computer Advance and House Building Advance (HBA). The maximum limit of House Building Advance (HBA) has been hiked from Rs 7 Lakhs to Rs 25 Lakhs.