MBA 2nd year batch
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..
The pay commission is an administrative system/ mechanism
that the government of India set up in 1946 to determine the
salaries of government employees.
•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
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.
• 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
• Sixth Pay Commission:
In July 2006, the cabinet approved setting up of the sixth pay
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.
•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,
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
Pay band Grade Pay
Junior Scale Assistant Commissioner of Police 1-4
Pay-Band – 3
Senior Scale (Under Secretary)
Superintendent Police (SP)/
Additional Deputy Commissioner of
Pay-Band - 3
Senior Scale: Junior Administrative
Grade (Deputy Secretary)
SP/ Deputy Commissioner of Police 9
Pay-Band - 3:
Senior Scale: Selection Grade
SP/ Senior SP 13
Pay-Band - 4
Super Time Scale (Director)
Deputy Inspector General of Police
(DIG)/Additional Commissioner of
Pay-Band - 4
Super Time Scale (Joint Secretary) Inspector General of Police
16 for IAS
18 for IPS
Pay-Band - 4
Above super Time scale (Additional
Additional Director General of
Police [This is a new police rank
created after the 3 CPC]
67000/-(annual increment @3%) -
Above Super Time Scale : HAG plus
Additional/Special Director General
of Police [This also is a new police
rank created after the 4 CPC]
75500/-- (annual increment@
Secretary/ special secretary
Director 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
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
Recommendations of 7th pay commission..
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%.
• Military Service Pay (MSP) ,which is a compensation for the various
aspects of military service, will be admissible to the defence forces
• 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.
Comparative study of 6th pay and 7th pay..
6th pay commission 7th pay commission
1. To examine the principles that should govern the
structure of pay, allowance & other benefits
1. 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
4. To examine the principles governing pension plans and
recurring benefits of govt employees appointed before
4. To examine the principles governing pension plans &
retirement benefits of govt employees appointed on &
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%)
Important Demands of this Pay
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
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
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.
PLB being bilateral agreement ,it should be out of 7th CPC preview.
(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.
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
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
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
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
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
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.
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
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.