Central government employees are set to see a hike in their salaries after the Union Cabinet last week approved the reformed allowance structure under Seventh Central Pay Commission. This will happen despite House Rent Allowance (HRA) rates being lowered under the pay panel.
The pay panel led by Justice AK Mathur had recommended HRA to be paid at 24 per cent, 16 per cent and 8 per cent of the basic pay for X, Y, and Z cities, as opposed to 30 per cent, 20 per cent and 10 per cent for the same, as stipulated by the preceding Pay Commission. Considering the recent inflation trends, these rates will be raised to 27 per cent, 18 per cent and 9 per cent when Dearness Allowance (DA) crosses 25 per cent. It will be hiked again to 30 per cent, 20 per cent and 10 per cent when the DA goes over 50 per cent.
Considering how the lowered HRA rates will be bothersome for employees in the lower salary brackets, the amount to be paid under HRA will never be lower than Rs 5,400, Rs 3,600 and Rs 1,800 for X, Y, and Z cities respectively. These numbers were reached by calculating HRA at 30 per cent, 20 per cent and 10 per cent of the minimum basic pay, which is Rs 18,000.
For a Class X city, HRA at 30 per cent of the previous basic pay, that was Rs 7,000, added Rs 2,100 to the pay check. On the other hand, HRA under 7th Pay Commission in a similar city will not go under Rs 5,400. This amounts to a 157 per cent increase in HRA awards than what was being paid earlier. This is expected to benefit 7.5 lakh central government employees working Level 1-3 jobs.
For higher positions, Cabinet Secretary and corresponding officials posted in Class X will be paid Rs 60,000 as HRA, against Rs 27,000 paid earlier, after their basic pay goes up to 2.5 lakhs on recommendations of 7th Pay Commission. This will be a 122 per cent hike.
The changes in allowances will be apparent in July salaries of central government employees after the Cabinet decision approving them is notified in the Official Gazette. The government is planning to do this within this week so that the employees can get the benefits from July itself.
The Cabinet approved the pay and pension recommendations under 7th Pay Commission back in August, 2016 but held back its decision on allowances. The reason behind this was the extensive changes recommended by the pay panel and dissent of central government employees over many of these changes.
Apart from the decline in HRA, the 7th Pay Commission had also suggested 52 allowances to be scraped and 36 other to be subsumed with other allowances. The Cabinet retained 12 allowances out of the ones recommended for abolition. Three of the allowances meant to be subsumed will also be maintained as separate entities due to their unique nature.
The Cabinet formed a Committee on Allowances under Finance Secretary Ashok Lavas who submitted his report in April this year. The report was then sent to Empowered Committee of Secretaries (E-CoS) for review and to consolidate recommendations by Lavasa Committee into proposals for the Cabinet.
Once through with it, the Empowered Committee handed over its proposals to Finance Minister Arun Jaitley on June 1. These proposals were presented and approved before the Cabinet on June 28.