Presented by,MBA 2nd year batchGIACRRAYAGADA

Contents:-1. What is pay commission?2. History of pay commission..3. Recommendations of 6th pay commission..4. Recommendations of 7th pay commission..5. Comparative study of 6th pay and 7th pay..6. Effects of 6th pay on economy and job sectors..7. Effects of 7th pay on economy and job sectors..8. Conclusion..

What is Pay

commission………?

The pay commission is an administrative system/ mechanism that the government of India set up in 1946 to determine the salaries of government employees.

History of pay Commission…

•First Pay Commission:The first pay commission was established on

January, 1946 and was submitted to interim government of India.

Headed by Srinivasa Varadachariar.

•Second Pay Commission:The second pay commission was set up in

August 1957, 10 years after independence.The second pay commission had a financial

impact of Rs 396 million.Chairman of the commission was Jagannath Das. • Third Pay Commission:

The third pay commission set up in April 1970. The cost of the proposals was 1.44 billion Chairman was Raghubir Dayal. The third pay commission (3CPC) added three very

important concepts of Inclusiveness, Comprehensibility, an adequacy for pay structure to be sound in nature.

Conti…

• Fourth Pay Commission: Constituted in June 1983. The financial burden on government was 12.82

billion. Chairman of fourth pay commission was P.N.

Singhal. • Fifth Pay Commission: Setting up the Fifth pay commission was issued

on 9 April 1994 but started functioning only on 2 May 1994.

Chairman of Fifth pay commission was Justice S. Ratnavel Pandian.

• Sixth Pay Commission: In July 2006, the cabinet approved setting up of

the sixth pay commission. Chairman was Justice B.N. Sri Krishna. Focus mainly on removing ambiguity in respect

of various pay scales and to bring the idea of pay bands. Conti

…

•7TH Pay Commission The government of India has initiated the

process to constitute the 7th Pay Commission along with the finalization its terms of reference.

On September 25, 2013 the finance minister P Chidambaram announced that the Prime minister Manmohan Singh has Approved the constitution of the 7th pay commission.

Its recommendations are implemented with effect from January 1, 2016.

Justice A. K. Mathur will be heading the 7th Pay Commission, announcement of which was done on 4th February 2014.

On 29 June 2016, Government accepted the recommendation of 7th Pay Commission Report with meager increase in salary of 14% after six month of intense evaluation and successive discussions.

Recommendations of 6th pay commission..The 6CPC estimated that the financial implication of its

recommendations would be "Rs.7975 crore for the year 2008-09, and an additional, one-time burden of Rs.18060 crore on

payment of arrears"1. Created 20 distinct pay grades or ranks in the Government hierarchy, with intent to determine the status and the Seniority of a post

2. Four running pay bands (excluding -1S) containing 20 grades for civilian employees as well as for the Defense Forces.

3. Clubbing four selection grade military ranks, Lt Colonel to Maj General and their equivalent in the navy and Air Force, in the same running pay band as for civilian time scale ranks with 4 to 16 years of service.

4. To placate the MHA's police led Armed Forces, and Indian Police Service officers, implemented "Non Functional " ranks.

5. Recognition of the growing role and influence of Ministry of Home(MHA), India's Interior Ministry, promoted the heads of the five police led Central Para Military Forces, to the highest grade pay, or the apex scale, with pay scale of Rs.80,000 (fixed).

Civilian Designation of Post[ Police Ranks[ Years of service for promotion Pay band Grade Pay

Junior Scale Assistant Commissioner of Police 1-4Pay-Band – 3

15600/--39100/-5400/-

Senior Scale (Under Secretary)Superintendent Police (SP)/

Additional Deputy Commissioner of Police

4 Pay-Band - 3

15600-39100/-6600/-

Senior Scale: Junior Administrative Grade (Deputy Secretary) SP/ Deputy Commissioner of Police 9

Pay-Band - 3:

15600-39100/-7600/-

Senior Scale: Selection Grade (Director) SP/ Senior SP 13

Pay-Band - 4

37400-67000/-8700/-

Super Time Scale (Director)Deputy Inspector General of Police

(DIG)/Additional Commissioner of Police

14Pay-Band - 4

37400-67000/-8900/-

Super Time Scale (Joint Secretary) Inspector General of Police16 for IAS

18 for IPS

Pay-Band - 4

37400-67000/-10000/-

Above super Time scale (Additional Secretary)

Additional Director General of Police [This is a new police rank

created after the 3 CPC]25 67000/-(annual increment @3%) -

79000 -

Above Super Time Scale : HAG plus (Special Secretary)

Additional/Special Director General of Police [This also is a new police

rank created after the 4 CPC]26-30 75500/-- (annual increment@

3%)-80000 Nil

Secretary/ special secretaryDirector General of Police [This too is a new police rank; initially there were few, now there are scores]

30 ₹80000 (fixed) Nil

Here are the highlights of the recommendations of the commission:

1. The present system of Pay Bands and Grade Pay has been dispensed with and a new Pay Matrix as recommended by the Commission has been approved. The status of the employee, hitherto determined by grade pay, will now be determined by the level in the Pay Matrix. Separate Pay Matrices have been drawn up for Civilians, Defence Personnel and for Military Nursing Service. The principle and rationale behind these matrices are the same.

2. All existing levels have been subsumed in the new structure; no new levels have been introduced nor has any level been dispensed with.

3. The minimum pay has been increased from Rs 7,000 to 18,000 per month. Starting salary of a newly recruited employee at the lowest level will now be Rs 18,000 whereas for a freshly recruited Class I officer, it will be Rs 56,100.

4. For the purpose of revision of pay and pension, a fitment factor of 2.57 will be applied across all Levels in the Pay Matrices. After taking into account the DA at prevailing rate, the salary/pension of all government employees/pensioners will be raised by at least 14.29 % as on 01.01.2016.

5. Rate of increment has been retained at 3%. 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.

Recommendations of 7th pay commission..

Conti…

6. The Cabinet approved further improvements in the Defense Pay Matrix by enhancing Index of Rationalization for Level 13A (Brigadier) and providing for additional stages in Level 12A (Lieutenant Colonel), 13 (Colonel) and 13A (Brigadier) in order to bring parity with Combined Armed Police Forces (CAPF) counterparts at the maximum of the respective Levels.

7. The Cabinet also approved the recommendation of the Commission to enhance the ceiling of House Building Advance from Rs 7.50 lakh to 25 lakh. In order to ensure that no hardship is caused to employees, four interest-free advances namely Advances for Medical Treatment, TA on tour/transfer, TA for family of deceased employees and LTC have been retained.

8. The Cabinet also decided not to accept the steep hike in monthly contribution towards Central Government Employees Group Insurance Scheme (CGEGIS) recommended by the Commission. The existing rates of monthly contribution will continue. This will increase the take home salary of employees at lower levels by Rs 1,470

9. The general recommendations of the Commission on pension and related benefits have been approved by the Cabinet. Both the options recommended by the Commission as regards pension revision have been accepted subject to feasibility of their implementation.

10. As estimated by the 7th CPC, the additional financial impact on account of implementation of all its recommendations 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.

Recommendations of 7th pay commission..

Key Points of 7th Pay Commission• Short service commissioned officers will be allowed to exit

the armed forces at any point in time between 7 to 10 years of service.

• Commission recommends abolishing 51 allowances; another 36 allowances subsumed in existing allowances or newly proposed allowances.

• The commission has proposed a status quo on the retirement age of central government employees. Retirement age for staff employees is 60 years.

• Total impact of are expected to entail an increase of 0.65% points in the ratio of expenditure on to GDP.

• Recommendations will impact 47 lakh serving govt employees;52 lakh pensioners, including defence personnel.

• One Rank One Pension proposed for civilian government employees on line of OROP for armed forces.

• Ceiling of gratuity enhanced from Rs. 10 lakh to Rs. 20 lakh; ceiling on gratuity to be raised by 25% whenever DA rises by 50%. Conti

…

• Military Service Pay (MSP) ,which is a compensation for the various aspects of military service, will be admissible to the defence forces personnel only.

• MSP for services officers more than doubled to Rs.15,500 per month from Rs. 6,000 currently; for nursing officers to Rs 10,800 from Rs. 4,200; for JCO/ORs to Rs 5,200 from Rs. 2,000 and non- combatants to Rs.3,600 from Rs. 1,000.

• Financial impact of implementing recommendations will be Rs. 1.02 lakh crore-Rs. 73,650 crore to be borne by Central Budget and Rs. 28,450 crore by Railway Budget.

• The 16% hike in basic salary is much lower than the 35% hike employees got in the sixth Pay Commission.

Conti….

Comparative study of 6th pay and 7th pay..

6th pay commission 7th pay commission1. To examine the principles that should govern the

structure of pay, allowance & other benefits1. To examine reviews, evolve & recommend changes

regarding principles governing structure of pay,etc

2. To work out a comprehensive pay package for the categories of central govt employees.

2. To work out the framework for an emoluments structure linked with the needs to attract the most suitable talent to govt services

3. To harmonize the functioning of central govt 3. To examine & review the scheme of payment of bonus & allowances

4. To examine the principles governing pension plans and recurring benefits of govt employees appointed before 01.01.2004

4. To examine the principles governing pension plans & retirement benefits of govt employees appointed on & after 01.01.2004

5. Increase in pay and allowances: 23.55% 5. Increase in pay and allowances: 24%

6. Minimum salary of government employee: 6660/- Maximum salary of government employee:-80,000/-

6. Minimum salary of government employee: 18000/- Maximum salary of government employee:-2,25,000/-

7. Annual increment : 2.5% 7. Annual increment : 3%

8. HRA of X class: 24%, Y class : 16%, Z class: 8%

8. HRA of X class: 27%, Y class : 18%, Z class: 9% (DA-50%) X class: 30%, Y class : 20%, Z class: 10% (DA-100%)

Pay Band 5200-20200 9300-34800 15600-39100 37400-67000 67000-79000

75500-80000 80000 90000

Grade Pay 1800 1900 2000 2400 2800 4200 4600 4800 5400 5400 6600 7600 8700 8900 10000

Entry Pay (EP) 7000 7730 8460 9910 11360 13500 17140 18150 20280 21000 25350 29500 46100 49100 53000 67000 75500 80000 90000

Level 0001 0002 0003 0004 0005 0006 0007 0008 0009 0010 0011 0012 0013 13A 0014 0015 0016 0017 0018

Index 0002.57 0002.57 0002.57 0002.57 0002.570002.62 0002.62 0002.62 0002.620002.670002.670002.67 0002.57 0002.67 0002.72 0002.720002.720002.81 0002.78

0001 18000 19900 21700 25500 29200 35400 44900 47600 53100 56100 67700 78800 118500 131100 144200 182200 205400 225000250000

0002 18500 20500 22400 26300 30100 36500 46200 49000 54700 57800 69700 81200 122100 135000 148500 187700 211600

0003 19100 21100 23100 27100 31000 37600 47600 50500 56300 59500 71800 83600 125800 139100 153000 193300 217900

0004 19700 21700 23800 27900 31900 38700 49000 52000 58000 61300 74000 86100 129600 143300 157600 199100 224400

0005 20300 22400 24500 28700 32900 39900 50500 53600 59700 63100 76200 88700 133500 147600 162300 205100

0006 20900 23100 25200 29600 33900 41100 52000 55200 61500 65000 78500 91400 137500 152000 167200 211300

0007 21500 23800 26000 30500 34900 42300 53600 56900 63300 67000 80900 94100 141600 156600 172200 217600

0008 22100 24500 26800 31400 35900 43600 55200 58600 65200 69000 83300 96900 145800 161300 177400 224100

0009 22800 25200 27600 32300 37000 44900 56900 60400 67200 71100 85800 99800 150200 166100 182700

0010 23500 26000 28400 33300 38100 46200 58600 62200 69200 73200 88400 102800 154700 171100 188200

0011 24200 26800 29300 34300 39200 47600 60400 64100 71300 75400 91100 105900 159300 176200 193800

0012 24900 27600 30200 35300 40400 49000 62200 66000 73400 77700 93800 109100 164100 181500 199600

0013 25600 28400 31100 36400 41600 50500 64100 68000 75600 80000 96600 112400 169000 186900 205600

0014 26400 29300 32000 37500 42800 52000 66000 70000 77900 82400 99500 115800 174100 192500 211800

0015 27200 30200 33000 38600 44100 53600 68000 72100 80200 84900 102500 119300 179300 198300 218200

0016 28000 31100 34000 39800 45400 55200 70000 74300 82600 87400 105600 122900 184700 204200

Pay Band 5200-20200 9300-34800 15600-39100 37400-6700067000

-79000

75500-80000 80000 90000

Grade Pay 1800 1900 2000 2400 2800 4200 4600 4800 5400 5400 6600 7600 8700 8900 10000

Entry Pay (EP) 7000 7730 8460 9910 11360 13500 17140 18150 20280 21000 25350 29500 46100 49100 53000 67000 75500 80000 90000

Level 0001 0002 0003 0004 0005 0006 0007 0008 0009 0010 0011 0012 0013 13A 0014 0015 0016 0017 0018

Index 0002.57 0002.57

0002.57

0002.57

0002.57

0002.62

0002.62

0002.62 0002.62 0002.6

70002.6

70002.6

70002.5

70002.6

70002.7

20002.

720002.7

20002.

810002.7

8

0029 41100 45700 50000 58500 66600 81200 102800 109100 121300 128200 155300 180500

0030 42300 47100 51500 60300 68600 83600 105900 112400 124900 132000 160000 185900

0031 43600 48500 53000 62100 70700 86100 109100 115800 128600 136000 164800 191500

0032 44900 50000 54600 64000 72800 88700 112400 119300 132500 140100 169700 197200

0033 46200 51500 56200 65900 75000 91400 115800 122900 136500 144300 174800 203100

0034 47600 53000 57900 67900 77300 94100 119300 126600 140600 148600 180000 209200

0035 49000 54600 59600 69900 79600 96900 122900 130400 144800 153100 185400

0036 50500 56200 61400 72000 82000 99800 126600 134300 149100 157700 191000

0037 52000 57900 63200 74200 84500 102800 130400 138300 153600 162400 196700

0038 53600 59600 65100 76400 87000 105900 134300 142400 158200 167300 202600

0039 55200 61400 67100 78700 89600 109100 138300 146700 162900 172300 208700

0040 56900 63200 69100 81100 92300 112400 142400 151100 167800 177500

Important Demands of this Pay Commission

Pay scales are calculated on the basis of pay drawn in pay band + GP+ 100% DA by employees as on 01/01/2016.

7th CPC report should be implemented w.e.f. 01/01/2016. In future five year wage revision.

Scrap New Pension Scheme and cover all employee under Old Pension and Family Pension Scheme.

JCM has proposed minimum wage for MTS(skilled) Rs. 26,000 p.m.

Ratio of minimum and maximum wage should be1:12.5. General formula for determination of pay scale based on

minimum minimum living wage demanded for MTS is pay in PB+GPx3.7.

Conti…

Conti…. Annual rate of increment @3% of the pay.

Fixation of pay on promotion= minimum two increments.

Dearness Allowances on the basis of 12 monthly average of CPI, Payment on 1st Jan and 1st July every year.

Overtime Allowances on the basis of total Pay + DA+ Full TA.

Liabilities of all Government dues of persons died in harness be waived.

Transfer Policy- Group ‘C and D’ Staff should not be transferred. DoPT should issue clear cut guideline as per 5th CPC recommendation. Govt should form a Transfer Policy in each department for transferring on Mutual basis on promotion. Any order issued in violation of policy framed be cancelled by head of department on representation.

The present MACPs Scheme be replaced by giving five promotion after completion of 8,15,21,26 and 30 year of service with benefits of stepping up of pay with junior and also hierarchical pay scales.

Conti…. PLB being bilateral agreement ,it should be out of 7th CPC preview.

Housing Facility:-(a) To achieve 70% houses in Delhi and 40% in all other town to

take lease accommodation and allot to the govt. employees.(b) Land and building acquired by it department may be used for

constructing houses for govt. Employees. Composite Transfer Grant:--Executive class 6000 kg Goods Train/Rate per km by road 8 Wheeler Wagon Rs.50+DA(Rs. 1 per kg and single container per km)-Non- Executive Class 3000kg-do- - do- Children Education Allowance should be allowed up to Graduate, Post Graduate, and all Professional Course. Allow any two children for children Education Allowance. Fixation of pay on promotion –two increments in feeder grade with

minimum benefit of Rs. 3000. Conti

…

Conti….1) Increase Casual leave 08 to 12 days & 10 days to 15 days.2) Declare May Day as National Holiday.3) In case of Hospital Leave , remove the ceiling of maximum

24 months leave and 120 days full payment and remaining half payment.

4) Allow accumulation of 400 days earned Leave.5) Allow encashment of 50% leave while in service at the credit

after 20 years qualifying Service.6) National Holiday Allowance(NHA)- Minimum one day

salary and eligibility criteria to be removed for all Non Executive Staff.

7) Permit Encashment of Half Pay Leave.8) Increase Maternity leave to 240 days to female employees &

increase 30 days .Paternity Leave to male employees.

Effects of 6th pay commission Margin increment would put an additional burden on Central Exchequer of Rs. 7,975-

crore per year while a lump sum of Rs. 18,060-crore will be spent in paying the credit money of employees in the form of arrears as the commission has recommended to implement the salary structure from January 01, 2006 and the difference of this period would be paid in the ‘arrear’ form, as per the commission’s submitted report.

The minimum salary of 6660/- and maximum of 80000/- have damaged the exchequer of states as now the states will also have to follow the Central’s pay structure because the states’ employees will demand the similar status from their government.

Pay commissions earlier reported that up to 90% of the total revenue were spent only in paying the salary and pension of the employees and beneficiaries. This

recommendation might prove the ‘panic’ decision for the state governments.

For the employees and pensioners, this recommendation can be proved as a ‘golden hen’ that can boost the living status of the government’s employees and can also eradicate the

complaint of the beneficiaries

Now, in this newly recommended report, commission has established the salary ratio of 1:12 (minimum Rs.6,600-maximum Rs.80,000)

Effects of 7th pay commission Positive effect:-1.The present system of Pay Bands and Grade Pay has been dispensed with and a new Pay Matrix as

recommended by the Commission has been approved.

2. Separate Pay Matrices have been drawn up for civilians, defence personnel and for military nursing service and all existing levels have been subsumed in the new structure.

3. The minimum pay has been increased from Rs 7,000 to Rs 18,000 per month. Starting salary of a newly recruited employee at lowest level will now be Rs 18,000 whereas for a freshly

recruited Class I officer, it will be Rs 56,100.

4. Due to the decision, the salary/pension of all government employees/pensioners will be raised by at least 14.29 per cent as on January 1, 2016.

5. Rate of increment has been retained at 3 per cent. This will benefit the employees in future on account of higher basic pay.

6. The Cabinet approved further improvements in the Defence Pay Matrix by enhancing Index of Rationalisation for Level 13A (Brigadier) and providing for additional stages in Level 12A (Lieutenant Colonel), 13 (Colonel) and 13A (Brigadier) in order to bring parity with Combined Armed Police Forces (CAPF) counterparts at the maximum of the respective Levels.

7. Some other decisions impacting the employees, including Defence & Combined Armed Police Forces (CAPF) personnel, include -- Gratuity ceiling enhanced from Rs 10 lakh to Rs 20 lakh. The ceiling on gratuity will increase by 25 per cent whenever DA rises by 50 per cent.

8. The cabinet approved the recommendation of the Commission to enhance the ceiling of House Building Advance from Rs 7.50 lakh to Rs 25 lakh. 

9. The cabinet, however, decided not to accept the steep hike in monthly contribution towards Central Government Employees Group Insurance Scheme (CGEGIS) recommended by the Commission. The existing rates of monthly contribution will continue.

11. The Commission examined a total of 196 existing Allowances and, by way of rationalization, recommended abolition of 51 Allowances and subsuming of 37 Allowances. The cabinet decided to constitute a committee headed by Finance Secretary for further examination of the recommendations of 7th CPC on Allowances.

12. The Cabinet also decided to constitute two separate Committees (i) to suggest measures for streamlining the implementation of National Pension System (NPS) and (ii) to look into anomalies likely to arise out of implementation of the Commission`s Report.

13. The additional financial impact on account of implementation of all its recommendations in 2016-17 will be Rs 1,02,100 crore.

14. 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

Conti….

Negative effect:-1. The previous pay commissions recommended for inclusion of the parents for the purpose

of Leave Travel concessions and passes. The same analogy should have been adopted for taking into account for the consumption of units for the purpose of computing the minimum wage .

2. Now in the VII pay commission the ratio proposed is 1:13.8 which is not acceptable and atleast the ratio should have been maintained.

3. Fitment factor of 2.57 has been proposed to be applied uniformly for all employees. This was arrived at by adding Basic Pay – 1, DA – 125% as 1.25 and fitment benefit of 32% on Basic Pay as compared to 40% in V & VI PC. However in the VII PC 32% fitment only given which is unjustified.

4. It seems that the pay commission had not gone into the details of the submissions made by the stake holders. Without going into the anomalies arising out of the VI PC implementation (Except Accounts) the commission submitted the report .

5. 51 allowances were proposed for abolishing by the pay commission which appears to be not correct. They should have left it to the respective departments depending upon their utility.

Effects of 7th pay commission

6. Pay commission proposal for withholding of annual increments for  the employees beyond 20 years of service in the case  of employees  who are not able to meet the bench mark either for MACP or for regular promotion is a retrograde step. This only increases slavery and not genuine one to get the increment.

7. Stake holders sought one day wage for working on national  holidays in the case of NHA. However  the increase is very meager  in the PC which requires review.

8.The commission has not made any observation with regard to    Running allowance.  Nor it has spelt out anything directing the Ministry of Railways to look into it.

9.Promotion benefit proposed is  one increment which is meager. It  should be at least 10% of the basic pay.

10. Allowances hold be kept out of the purview of income tax.

11. The  sixth pay commission recommended for grouping of the  supervisors i.e., OS I and Chief OS, and SE and  SSE in to one Grade pay  which not only affected the hierarchy but also the working system. Due to the above, the employees at the highest supervisory cadre are demoralized/ demotivated. The injustice meted to them is continued even in VII pay commission. Hence there is a  need to rectify the same on par with the Accounts cadre.

Conti….

12. Pay commission proposed for merger of GP 1900(Level 2) with the GP 2000(Level 3)for commercial department. However it has not gone into the details for other cadres in Railways. The lower cadre working for so many years are getting very lesser benefit .This needy to be rectified in this commission.

13. The recommendations are not satisfactory for the lower GP employees  who are residing in Government accommodation. Their take home pay after implementation of the VII PV recommendations will become lesser due to enhancement of subscription towards PF and CGEIS.

14. The Pay commission has recommended for OROP for the civil pensioners also.  However, it is seen to be beneficial only to the higher levels of the pensioners as per the illustrations given in the report.

Conti….

Conclusion:-