7th Pay Commission (2014-2016)

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7th Pay Commission (2014-2016)

Background

  • Established: February 2014
  • Chairperson: A. K. Mathur
  • Objective: To review and revise salaries, allowances, and pensions for central government employees, aligning them with current economic conditions and addressing the evolving needs of the workforce.

Key Recommendations

  1. Minimum Salary:

    • Increased to ₹18,000 per month, up from ₹7,000 in the 6th Pay Commission.

  2. Pay Structure:

    • Abolished the Pay Band and Grade Pay system.
    • Introduced a new Pay Matrix with a simplified and transparent structure.
    • Salary progression now determined by a Level system instead of Pay Bands.

  3. Fitment Factor:

    • Recommended a fitment factor of 2.57 for basic pay revision.
    • All salaries were multiplied by 2.57 to calculate the new pay.

  4. Dearness Allowance (DA):

    • DA continued to be revised periodically based on inflation.

  5. Allowances:

    • Rationalized over 200 allowances, reducing them to 196.
    • Introduced Risk and Hardship Allowance for employees in challenging environments.
    • Revised House Rent Allowance (HRA) based on city categories:
      • X: 24% of basic pay
      • Y: 16% of basic pay
      • Z: 8% of basic pay

  6. Pension Benefits:

    • Minimum pension set at ₹9,000 per month.
    • Recommended parity between pensions of current and past retirees by revising the formula.

  7. Defense Personnel:

    • Continued Military Service Pay (MSP) with an increase for specific ranks.
    • Special focus on allowances for armed forces personnel in difficult terrains.

  8. Performance:

    • Suggested linking annual increments to performance for higher accountability.

Impact

  1. Significant Pay Increase:

    • Salaries increased substantially, benefiting over 1 crore employees and pensioners.

  2. Simplified Pay Structure:

    • The Pay Matrix made salary progression and calculations more transparent and easier to understand.

  3. Enhanced Pensions:

    • Older retirees benefitted from parity and increased pensions.

  4. Economic Impact:

    • The total financial burden on the exchequer was estimated at ₹1.02 lakh crore annually, including ₹73,650 crore for salaries and ₹28,450 crore for pensions.

  5. State Governments:

    • Many state governments adopted the recommendations, leading to higher fiscal pressure at the state level.

  6. Employee Morale:

    • Significant pay hikes and revised allowances improved job satisfaction.

Challenges

  1. Fiscal Strain:
    • The cost of implementation put pressure on government finances.
  2. Discontent:
    • Certain groups, including armed forces personnel and paramilitary staff, expressed dissatisfaction with their revised pay and allowances.
  3. Allowances Rationalization:
    • Reduction of some allowances led to grievances among employees in remote and difficult areas.

Would you like further details on how the Pay Matrix works or its sector-specific impacts?


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