Cabinet okays pay hike for govt staff

First enhanced salary from August
Last Updated : 29 June 2016, 21:26 IST
Last Updated : 29 June 2016, 21:26 IST

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The Union government on Wednesday paved the way for a huge salary hike for over one crore employees and pensioners.  

The Cabinet accepted the recommendations of the 7th Pay Commission, benefiting about 47 lakh central government employees who will get a 2.5 times hike in their basic pay from August. The move will also benefit about 53 lakh pensioners.

The government will also pay arrears this year itself, but the allowances will be given as earlier till a government-appointed committee on allowances gives its recommendations afresh.

The payouts will come into effect from January 1, 2016, and cost the exchequer Rs 1.02 lakh crore per annum.

Briefing reporters after the Cabinet meeting chaired by Prime Minister Narendra Modi, Finance Minister Arun Jaitley reiterated that the government will pay arrears to the employees this year itself, unlike the other Central Pay Commission (CPC) rewards, which came after many months and years. He said payouts have an inevitable impact on the country’s budget, but this year adequate provision has been made.

The government has provided Rs 70,000 crore towards the 7th CPC payout in the 2016-17 Budget.

Money matters

The basic salary at the lowest level in the government will now be Rs 18,000 per month, up from Rs 7,000, whereas for a freshly recruited Class I officer it will be Rs 56,100. This is a hike of 2.57 times of the present basic pay, Jaitley said.

The salary of a secretary will be Rs 2.5 lakh per month as compared to the Rs 90,000 at present. “The government salaries have to reach a respectable level to attract talents. This will have an inevitable impact on the budget. I have provided for it in this year’s budget,” Jaitley said.

The 7th CPC recommendation of the Pay Matrix was also approved by the Cabinet, replacing the Pay Bands and Grade Pay. The government also approved the 7th CPC recommendation of enhanced ceiling of house building loans from Rs 7.50 lakh to 25 lakh.

In order to ensure that no hardship is caused to employees, four interest free credits – for medical treatment, travel allowance on tours/transfers, travel allowance for family of deceased employees and leave travel concession have been retained. All other interest-free loans have been abolished.

The government also decided not to accept the steep hike in the monthly contribution towards the Central Government Employees Group Insurance Scheme 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.

However, considering the need for social security of employees, the Cabinet has asked the finance ministry to work out a customised group insurance scheme for Central government employees with low premium and high risk cover.

“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 military nursing service. The principle and rationale behind these matrices are the same,” Finance Secretary Ashok Lavasa said.

Published 29 June 2016, 21:26 IST

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