Tweaking and improving upon the award of the sixth Central Pay Commission, the government today decided to give each of its estimated 4.6 million employees a pay raise of between 28 and 40 per cent over their existing basic pay.
The revised pay rules are expected to be notified within 15 days. Employees will start receiving their higher salaries and allowances with effect from September this year.
The government has decided to issue the arrears in cash over two years — 2008-09 and 2009-10 — with the first instalment of 40 per cent being paid by September this year and the balance next year.
The improved sixth Pay Commission award was approved by the Cabinet here today and will be part of Prime Minister Manmohan Singh’s Independence Day speech on Friday. The Commission had recommended an effective across-the-board raise of 28 per cent. The new pay package is an important tool in the government’s arsenal as it heads into a general election scheduled next year.
Accepting the broad recommendations of the Commission with some modifications on account of the representations by various sections of employees, including the armed forces, the Cabinet said the new system of 4 pay bands and 20 grade pays has been accepted. Recommendations like performance related pay will also start, with the science and technology ministry likely to be the first to implement this system that was suggested by the Commission.
However, the recommendation to cut the number of official holidays has not been accepted as yet due to the perceived backlash that such a move would invite from the employee unions.
The improvement over the Pay Commission award is on account of an enhanced fitment in the revised pay bands by including a higher dearness allowance factor, an increase in the annual increment rate slab to 3 per cent, with high performers to be now given a 4 per cent annual raise.
| BIGGER, BETTER (Highlights of the new Central government pay award) |
| * Revised pay scale effective from January 1, x2006, revised allowances from September 1, 2008 |
| * Arrears in two installments, 40% in 2008-09 and 60% in 2009-10 |
| * Revised pay scale will have a financial implication of Rs 15,700 crore on central government and Rs 6,400 crore on the Railway Budget in 2008-09. |
| * Minimum basic pay of a government servant will be Rs 7,000, up from Rs 6,660 recommended by Commission |
| * Annual increment raised from 2.5 % to 3%, and 4% for high performers |
| * At least three promotions assured to all defence and civilian employees |
| * Raise in transport allowance at the lowest level to Rs 600 in A-1/A class cities, by Rs 400 in other cities |
In addition, the minimum basic pay for a government servant has also been increased, even as the transport allowance has been hiked and restrictions on it being removed. The Cabinet has also doubled the military service pay for personnel below officer rank. Several other improvements in the allowances and promotion policies have also been introduced.
Government officials said the annualised impact of the new salary structure would be Rs 17,798 crore, adding to the approximate Rs 1,04,000-crore annual pay, allowances and pension bill of the centre.
Finance Minister P Chidambaram said the budgetary impact of the new pay scales had been taken into account when the government cleared the recommendations and added that deficit targets would be adhered to. “The payout is not a new development. It had been factored into when the Budget was prepared,” he added. The fiscal impact of the final award is within 0.4 per cent of gross domestic product.
