5th Pay Commission (1994-1997)

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5th Pay Commission (1994-1997)

Background

  • Established: April 1994
  • Chairman: Ratnavel Pandian
  • Objective: To address inflation, revise pay scales, and rationalize the structure of salaries, allowances, and pensions for central government employees.

Key Recommendations

  1. Minimum Salary:

    • Increased to ₹2,550 per month, up from ₹750 in the 4th Pay Commission.

  2. Pay Structure:

    • Recommended restructuring pay scales into 33 standard scales, reducing complexities.
    • Proposed eliminating pay disparities between various employee categories.

  3. Dearness Allowance (DA):

    • Revised the DA formula to better address inflation.

  4. Retirement Benefits:

    • Enhanced pensions and gratuity.
    • Minimum pension increased to ₹1,275 per month.

  5. Efficiency and Productivity:

    • Recommended incentives for productivity in departments like Railways, Postal Services, and Telecommunications.

  6. Allowances:

    • Significant revision of allowances, including House Rent Allowance (HRA) and Transport Allowance (TA).

  7. Voluntary Retirement Scheme (VRS):

    • Introduced a scheme to help reduce the government workforce and manage costs.

Impact

  1. Improved Salaries and Living Standards:

    • Substantial salary increases helped central government employees tackle inflation.

  2. Rationalized Pay Structure:

    • Simplified pay scales improved transparency and fairness in compensation.

  3. Better Retirement Security:

    • Enhanced pension and gratuity benefits provided better financial security to retirees.

  4. Fiscal Strain:

    • Implementation led to a significant increase in the central government’s expenditure.

  5. Impact on State Governments:

    • Many state governments faced financial pressure as they adopted similar recommendations.

Challenges

  • Increased pay and benefits created a heavy fiscal burden on the exchequer.
  • Some groups felt the recommendations did not adequately address disparities between higher and lower-level employees.

Would you like details on its specific impact on any sector or group?

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