The award of the pay panel will also benefit staff of autonomous bodies, universities and public sector units, Jaitley said after receiving the report.

7th Pay Commission Report – ‘In a Nutshell’ – “This will impact 47 lakh employees and 52 lakh pensioners. The total monetary impact on the central government would be Rs 1.02 lakh crore.

In its report submitted to the Union Finance Minister Arun Jaitley on Thursday, the Seventh Central  Pay Commission has recommended an overall increase of 23.55 per cent in pay, allowances, and pension forgovernment employees.

The award of the pay panel will also benefit staff of autonomous bodies, universities and public sector units, Jaitley said after receiving the report.

“This will impact 47 lakh employees and 52 lakh pensioners. The total monetary impact on the central government would be Rs 1.02 lakh crore. Around Rs 74,000 crore would be the impact on the Union Budget and Rs 28,000 crore on the Railway Budget,” Mr Jaitley said at his residence after he received the report from Justice A.K. Mathur, Chairperson of the Commission. Mr Jaitley said the impact of the recommendations amounts to 0.6 per cent of GDP, adding that while the government would review the report soon, the State governments would take their own view on it.

Justice Mathur said, “My only consideration was to make the service condition of all the service employees ameliorating so that they may perform their duty without worrying about their butter and bread.”

7th Pay Commission Report ‘In a Nutshell’

• Based on the Aykroyd formula, the minimum pay in government is recommended to be set at Rs. 18,000 per month and Rs. 2,25,000 per month for Apex Scale and Rs. 2,50,000 per month for Cabinet Secretary and others presently at the same pay level.
• In percentage terms, the overall increase in pay and allowance and pensions over the business-as-usual scenario will be 23.55 per cent”, Within this, the increase in pay will be 16 per cent, in allowances 63 per cent and in pension would be 24 per cent.
• The impact the recommendations will be Rs 1.02 lakh crore — Rs 73,650 cr on Central Budget and Rs 28,450 cr on Railway Budget.
• The report has abolished 52 allowances altogether and another 36 allowances have been subsumed either in an existing allowance or in newly proposed allowances.
• Considering the issues raised regarding the Grade Pay structure and with a view to bring in greater transparency, the present system of pay bands and grade pay has been dispensed with and a new pay matrix has been designed. Grade Pay has been subsumed in the pay matrix. The status of the employee, hitherto determined by grade pay, will now be determined by the level in the pay matrix.
• Pay Commission recommends 3% annual increment and 24% hike in pension for central government staffers.
• FY17 impact seen at Rs 1.02 lakh crore from implementation of the 7th Pay Commission.
• Without calling it one-rank-one-pension (OROP), the Pay Commission recommended a revised pension formulation for the central government employees, including para-military personnel as well as for defence staff who have retired before January 1, 2016.
• The formulation will bring parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.
• In case of retired government servants, it said, their pension should not be deducted from their consolidated pay. The consolidated pay package should be raised by 25 percent and Dearness Allowance by 50 percent.
• The report says “Civil servants today need to be focused on outcomes, not processes, and have to be more accountable for delivery. They have to be agents of change and to this end need to be more agile, more technically savvy and to be able to ensure the economic and public service reforms that are essential.”
• The Commission has also recommended introduction of the Performance Related Pay (PRP) for all categories of Central Government employees, based on quality Results Framework Documents, reformed Annual Performance Appraisal Reports and some other broad Guidelines. It suggested that the PRP should subsume the existing Bonus schemes.
• The chairman of Seventh Pay Commission justice Ashok Mathur and member Rathin Roy suggest that in the present scenario, it is keenly felt that there needs to be a paradigm shift and the methodology that has been adopted in the past, namely of a seniority driven approach within the various services, has to be revisited. With the role of government in development and in making the country a market driven, investor friendly economy, key functionaries who should be evolving policy and driving the development process should be ones who have the requisite domain knowledge and sufficient experience in the departments and areas that they are required to head.
• “In this context, that the service related claims for any top position are not relevant anymore, and what is important is that the right person is selected for every job. The analysis and the recommendations in the paragraphs that follow reflect this approach,” they say.
• The approach suggested by this committee was that the skills and background of officers be carefully matched to the requirements of particular positions, while not confining individual officers to narrowly defined tasks or sectors. It was recommended that eleven domains (other than IAS) be identified and as part of the empanelment process at joint secretary and additional secretary levels each officer’s domain expertise be specifically identified.
• It has suggested revision of rates of lump sum compensation for next of kin (NOK) in case of death arising in various circumstances relating to performance of duties, to be applied uniformly for the defence forces personnel and civilians including CAPF personnel.
• In view of grievances relating to New Pension Scheme (NPS), it suggested steps to improve the functioning of scheme and establishment of a strong grievance redressal mechanism.
• The Commission has recommended a consolidated monthly pay package of Rs 4.50 lakh and Rs 4 lakh for chairpersons and members respectively of the regulatory bodies.
• The chairman and other member Dr Rathin Roy recommended the age of superannuation for all central armed forces personnel to be raised to 60 years from current 58 years, another member Vivek Rae did not agree with it. He endorsed the stand of home ministry.
• Introduction of a health insurance scheme for employees and pensionershas been recommended. Meanwhile for the benefit of pensioners outside the CGHS areas, CGHS should empanel those hospitals which are already empanelled under CS(MA)/ECHS for catering to the medical requirement of these pensioners on a cashless basis.
• All postal pensioners must be covered under CGHS. All postal dispensaries should be merged with CGHS.
• Under the central government employees group insurance scheme, the rates of contribution as well as insurance coverage have now been enhanced. Monthly deduction has been raised from Rs 120 per month to Rs 5,000 and insurance cover from Rs 1.2 lakh to Rs 50 lakh for senior most level. At the bottom of the matrix, it has been raised from Rs 30 per month to Rs 1,500 and the cover hiked from Rs 30,000 to Rs 15 lakh.
• The commission has recommended abolition of all non-interest bearing advances and increased the limit for interest-bearing advances for buying home from Rs 7.5 lakh to Rs 25 lakh.
• House rent allowance – a key perk — has also been rationalized at 24%, 16% and 8% of the basic pay, depending on the city where the employee works, and would increase when the dearness allowance crosses 50% and 100%.
• Under the Modified Assured Career Progression (MACP) the Commission has proposed that annual increments not be granted in the case of those employees who are not able to meet the benchmark either for MACP or for a regular promotion in the first 20 years of their service.
• A fresh IAS recruit will get a basic salary of Rs 56,000 a month against Rs 23,000 currently, while a sepoy in the Indian Army will earn Rs 21,700 per month from Rs 8,460 currently. In addition, employees are paid dearness allowance and house rent among many other allowances.
• There were some controversial issues that the Commission could not reach a consensus on. The most significant has to do with the perceived financial ‘edge’ granted to IAS and IFS officers at three promotion stages. Justice Mathur recommended that this be extended to the Indian Police Service and the Indian Forest Service as well.
• Justice Mathur writes in his concluding note “that the main cause for resentment among services is that over a period of time IAS has arrogated to itself all power of governance and relegated all other services to secondary position. All posts covering majority of domains are today manned by IAS, be it a technical or administrative which is the main cause of grievance. It is time that government take a call that subject domain should be the criteria to man the posts and not a generalist. If fair and equitable treatment is not given to all Services, then the gap between IAS and other services will widen and it may lead to a chaotic situation and it will not be good for the governance and country.”
• A member, Vivek Rae a former IAS officer, however, disagrees with chairman and economist Member. Rae argues for continuance of IAS officers unflinching superiority in the babudom.
• Rae is of the view that “the observations made by the panel’s Chairman call for a paradigm shift from a cadre based Civil Service structure to a post based structure including induction of lateral entrants from outside government. While this issue can be debated (and has been debated), it falls well beyond the mandate of this Commission.”

D K Srivastava, chief economist at EY, said the impact of the pay commission’s recommendation on fiscal deficit due to increased outgo on the salaries of the government employees would not be much in the current fiscal as only three months were left.

“We will see an increase in disposable income of consumers that will push up demand and absorb the excess supply in the system. However, the net effect would be lower than direct effect as the government’s capital spend comes down as its current expenditure will expand because of higher salary outgo on government employees,” he said.

To hasten the implementation of the recommendation, the government has decided to set up an implementation secretariat that would be headed by the expenditure secretary. The ministry will also create a separate empowered committee under the cabinet secretary that will look at suggestions from stakeholders.

New 7th Pay Commission Pay Structure, Pay fixation method and fitment Formula – Grade Pay system dispensed with and new pay model by merging the existing grade pay inroduced

7th Pay Commission has evolved a new pay structure by merging the existing grade pay with pay in pay band. Therefore Grade Pay system and pay band Structure is dispensed with.

7th pay commission also mentioned that since grade pay computation by 6th CPC varied greatly it is dispensed with.

New functional level pay model have been proposed by merging the grade pay with the pay in the pay band. All of the existing levels have been subsumed in the new structure; no new level has been introduced nor has any existing level been dispensed with.

The Commission has designed the new pay matrix keeping in view the vast opportunities that have opened up outside government over the last three decades, generating greater competition for human resources and the need to attract and retain the best available talent in government services. The nomenclature being used in the new pay matrix assigns levels in place of erstwhile grade pay and Table 3 below brings out the new dispensation for various grades pay pertaining to Civil, Defence and MNS.

7th Pay Commission has formulated fitment formula as far as existing employees are concerned as 2.57. For instance, 7CPC pay of the employees who are presently in the pay band of 5200 – 20200 with grade pay of Rs. 1800, will be calculated by multiplying the factor of 2.57 with their existing basic pay (pay in pay band + grade pay)

Grade pay and pay band wise fitment formula is as follows

Pay Band 1	(5200- 20200)
Grade Pay	1800	1900	2000	2400	2800
Current Entry Pay	7000	7730	8460	9910	11360
Rationalised Entry Pay (2.57)	7000*(2.57) =18000	7730*(2.57) =19900	8460*(2.57) =21700	9910*(2.57) =25500	11360*(2.57) =29200
Pay Band 2	(9300-34800)
Grade Pay	4200	4600	4800	5400
Current Entry Pay	13500	17140	18150	20280^
Rationalised Entry Pay (2.62)	13500*(2.62) =35400	17140*(2.62) =44900	18150*(2.62) =47600	20280*(2.62) =53100
Pay Band 3	(15600-39100)
Grade Pay	5400	6600	7600
Current Entry Pay	21000	25350	29500
Rationalised Entry Pay (2.67)	21000*(2.67) =56100	25350*(2.67) =67700	29500*(2.67) =78800
Pay Band 4	(37400-67000)
Grade Pay	8700	8900	10000
Current Entry Pay	46100	49100	53000
Rationalised Entry Pay (2.57/2.67/2.72)	46100*(2.57) =118500	49100*(2.67) =131100	53000*(2.72) =144200
HAG	(67000-79000)
Current Entry Pay	67000
Rationalised Entry Pay (2.72)	67000*(2.72) =182200
HAG+	(75500-80000)
Current Entry Pay	75500
Rationalised Entry Pay (2.72)	75500 *(2.72) =205400
Apex	80000 (fixed)
Rationalised Pay (2.81)	80000*2.81 =225000
Cabinet Secretary	90000 (fixed)
Rationalised Pay (2.78)	90000*2.78 =250000

The pay matrix comprises two dimensions. It has a “horizontal range” in which each level corresponds to a ‘functional role in the hierarchy’ and has been assigned the numbers 1, 2, and 3 and so on till 18.

The “vertical range” for each level denotes ‘pay progression’ within that level. These indicate the steps of annual financial progression of three percent within each level. The starting point of the matrix is the minimum pay which has been arrived based on 15th ILC norms or the Aykroyd formula. This has already been explained in Chapter
4.2 of the 7th Pay Commission report.

On recruitment, an employee joins at a particular level and progresses within the level as per the vertical range. The movement is usually on anannual basis, based on annual increments till the time of their next promotion.

When the employee receives a promotion or a non-functional financial upgrade, he/she progresses one level ahead on the horizontal range.

The pay matrix will help chart out the likely path of pay progression along the career ladder of any employee. For example, it can be clearly made out that an employee who does not have any promotional prospects in his cadre will be able to traverse through at least three levels solely by means of assured financial progression or MACP, assuming a career span of 30 years or more.

The new pay matrix for civilian employees is brought out in Table 5 of the pay commission report.

Minimum Pay

The JCM-Staff Side, in their memorandum, have proposed that the minimum salary, at the lowest level, should be determined using a need based approach. They have proposed that the minimum wage for a single worker be based on the norms set by the 15th Indian Labour Conference,  with  certain  additions  to  the  same.  The  minimum  pay as  suggested  in  the memorandum is ₹26,000, which is around 3.7 times the existing minimum salary of ₹7,000. While the broad approach is similar, the specifics do vary and the Commission has, based on need-based minimum wage for a single worker with family as defined in the Aykroyd formula, computed the minimum pay at ₹18,000. Details on the computation of minimum pay have been brought out in Chapter 4.2.

Fitment

The starting point for the first level of the matrix has been set at  ₹18,000. This corresponds to the starting pay of ₹7,000, which is the beginning of PB-1 viz., ₹5,200 + GP 1800, which prevailed on 01.01.2006, the date of implementation of the VI CPC recommendations. Hence the starting point now proposed is 2.57 times of what was prevailing on 01.01.2006.

This fitment factor of 2.57 is being proposed to be applied uniformly for all employees. It includes a factor of 2.25 on account of DA neutralisation, assuming that the rate of Dearness Allowance would be 125 percent at the time of implementation of the new pay. Accordingly, the actual raise/fitment being recommended is 14.29 percent.

Pay Fixation in the New Pay Structure

The fitment of each employee in the new pay matrix is proposed to be done by multiplying his/her basic pay on the date of implementation by a factor of 2.57.

The figure so arrived at is to be located in the new pay matrix, in the level that corresponds to the employee’s grade pay on the date of implementation, except in cases where the Commission has recommended a change in the existing grade pay.

If the identical figure is not available in the given level, the next higher figure closest to it would be the new pay of the concerned employee. A couple of examples are detailed below to make the process amply clear.

The pay in the new pay matrix is to be fixed in the following manner:

Step 1: Identify Basic Pay (Pay in the pay band plus Grade Pay) drawn by an employee as on the date of implementation. This figure is ‘A’.

Step 2: Multiply ‘A’ with 2.57, round-off to the nearest rupee, and obtain result ‘B’.

Step 3: The figure so arrived at, i.e., ‘B’ or the next higher figure closest to it in the Level assigned to his/her grade pay, will be the new pay in the new pay matrix. In case the value of‘B’ is less than the starting pay of the Level, then the pay will be equal to the starting pay of that level.

Changes recommended in MACP Scheme by 7th Pay Commission – Benchmark for MACP to be raised from good to vey good

Frequency of Modified Assured Career Progression (MACP)

7th Pay Commission is of the view that there is no justification for increasing the frequency of MACP and it will continue to be administered at 10, 20 and 30 years as before.

In the new Pay matrix, the employees will move to the immediate next levelin the hierarchy. Fixation of pay will follow the same principle as that for a regular promotion in the pay matrix.

MACP will continue to be applicable to all employees up to HAG levelexcept members of Organised Group `A’ Services where initial promotions up to NFSG are time bound and hence assured.

With regard to the benchmark for performance appraisal for MACP as well as for regular promotion, 7th Pay Commission has recommended that in the interest of improving performance level, the same has to be enhanced from ‘Good’ to ‘Very Good.’

In addition, introduction of more stringent  criteria such as  clearing of departmental examinations or mandatory training before grant of MACP can also be considered by the government.

Withholding Annual Increments of Non-performers

There is a widespread perception that increments as well as upward movement in the hierarchy happen as a matter of course.

The perception is that grant of MACP, although subject to the employee attaining the laid down threshold of performance, is taken for granted.

7th Pay Commission has proposed that employees who do not meet the laid down performance criterion should not be allowed to earn future annual increments.

The Commission has proposed for withholding of annual increments in the case of those employees who are not able to meet the benchmark either for MACP or a regular promotion within the first 20 years of their service.

This will act as a deterrent for complacent and inefficient employees. However, since this is not a penalty, the norms for penal action in disciplinary cases involving withholding increments will not be applicable in such cases. This will be treated as an “efficiency bar”.

Additionally, for such employees 7cpc has also proposed that there could be an option to leave service on similar terms and conditions as prescribed for voluntary retirement.

Promotional hierarchy instead of Grade Pay hierarchy:

MACP Scheme introduced by 6th Pay Commission, provided for career progression in next grade pay hierarchy irrespective of the fact that the next grade pay in hierarchy happens to be the same.  The new pay matrix advocated by 7th Pay Commission may rectify this inconsistency as 7th CPC observers that horizontal traversal in the pay matrix on promotion or MACP  would take care of promotional hierarchy.

Transport Allowance recommended by 7th pay Commission

Transport  Allowance  (TPTA)  is  granted  to  cover  the  expenditure  involved  in commuting between place of residence and place of duty. The existing rates are as under:

Employees Drawing	A1/A Class City (₹ pm)	Other Places (₹ pm)
GP 5400 and above	3200 + DA	1600 + DA
GP 4200 to GP 4800 and other employees drawing GP<4200 but pay in the pay band equivalent to ₹7440 and above	1600 + DA	800 + DA
GP<4200 and pay in the pay band below ₹7440	600 + DA	300 + DA

Transport Allowance structure recommended by 7th Pay Commission is as follows

Pay Level	Higher TPTA Cities (₹ pm)	Other Places (₹ pm)
9 and above	7200+DA	3600+DA
3 to 8	3600+DA	1800+DA
1 and 2	1350+DA	900+DA

The following table would be useful to equate the existing pay band / Grade pay structure with the New Pay level

Levels as per the Pay Matrix

Existing Pay Bands	Existing levels of Grade Pay	Available for*	New Levels
PB-1	1800	C	1
	1900	C	2
	2000	C,D	3
	2400	C	4
	2800	C,D	5
PB-2	3400	D	5A
	4200	C,D	6
	4600	C,D	7
	4800	C,D	8
	5400	C	9
PB-3	5400	C,D,M	10
	5700	M	10A
	6100	D	10B
	6100	M	10B
	6600	C,D,M	11
	7600	C	12
PB-4	7600	M	12
	8000	D	12A
	8400	M	12B
	8700	C	13
	8700	D	13
	8900	C	13A
	8900	D	13A
	9000	M	13B
	10000		14
HAG			15
HAG+			16
Apex			17
Cabinet Secretary, Defence Chiefs			18
*C: Civil; D: Defence; M: Military Nursing Service (MNS)