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July 01, 2016

Important : Key Highlights of 7th Pay Commission

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The Union cabinet on 29th June 2016 has accepted the recommendations of the 7th Pay Commission, giving a substantial raise to the salaries and pensions of central government employees. This going to be a hot topic for upcoming competitive exams (especially for bank exams). So here are some important points and highlights you should know about the 7th Pay Commission.

What is a Pay Commission?

  • The Pay Commission is an administrative system/mechanism that the government of India set up in 1956 to determine the salaries of government employees.
  • The First Pay Commission was established in 1956, and since then, every decade has seen the birth of a commission that decides the wages of government employees for a particular time-frame.
  • The Second Pay Commission was set up in August 1957 and gave its report in two years. 
  • The Third Pay Commission, set up in April 1970, submitted its report in March 1973.
  • The recommendations of the Fourth Pay Commission covered the period between 1986 and 1996. T
  • he Fifth Pay Commission covered the period between 1996 and this year.
  • The Union Cabinet, under the stewardship of then Prime Minister Manmohan Singh, approved the setting up of the 6th Pay Commission to revise the payscales of central government employees in July 2006.
    • The 6th Pay Commission is headed by its Chairman Justice B N Srikrishna, and has Ravindra Dholakia, J S Mathur and Sushama Nath as its other members.
  • The 7th Pay commission was approved on 29th June 2016.

7th Pay Commission :

People Behind 7th Pay Commission
  • Chairman : aJustice Ashok Kumar Mathur
  • Members :
    • Full Time : Vivek Rae
    • Part Time : Rathin Roy
  • Secretary : Meena Agarwal

Key Highlights of the 7th Pay Commission

  • Minimum pay of Rs 18,000 has been recommended against the existing Rs 7,000 per month
  • The rate of annual increment is being retained at 3 per cent
  • The commission has recommended abolishing 52 allowances altogehter
  • Another 36 allowances have been abolished as separate identities, but subsumed either in an existing allowance or in newly proposed allowances
  • Gratuity ceiling doubled from Rs 10 lakh to Rs 20 lakh and housing loan allowance hiked from Rs 7.5 lakh to Rs 25 lakh
  • Two dates of increments in place of existing one – 1st Janunary and 1st July
  • Ex-gratia lump sum compensation and military service pay increased
  • Existing rates of monthly contribution towards Group Insurance to continue
  • Grade Pay & Pay Band structure to be replaced by Pay Matrix, comprising 19 Levels
  • Total annual burden of pay, pensions and arrears of 7th Pay Commission recommendations stands at Rs 1,02,100 crore.
  • The total financial impact in the FY 2016-17 is likely to be ₹1,02,100 crore
  • Rs 2,25,000 per month is the maximum pay for apex scale and Rs 2,50,000 per month for Cabinet Secretary and others presently at the same pay level
  • Based on the minmum pay, a fitment factor of 2.57 is being proposed to be applied uniformly for all employees.
Bhawatarini Nagendran
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