7th pay commission arrears could hurt employees finances

New Delhi: Central government employees’ fiscal position will be impacted by the arrears of 7th Pay Commission recommendations.

This week, The government put the final seal of approval on the 7th pay commission recommendations.

As per the notification and resolution, central government employees will receive an average 14.27 per cent hike in basic pay effective from January 1, 2016, meaning that the government will also pay them arrears for the past seven months as employees will now get the revised pay from their August salaries.

The previous 6th Pay Commission had recommended a 20 per cent hike which the government doubled while implementing it in 2008.

The hype around the 7th Pay Commission recommendations is completely unnecessary, as the real impact is going to be much lesser both in absolute and relative terms compared with the previous 6th Pay Commission. As such, the employees don’t take it as any effect will be made on their finances.

One of the biggest reasons the current pay hike won’t have an impact anywhere near the result that the 6th pay commission had is because of the low arrear amount that will be disbursed this time around.

Last time, due to the delay in setting up the panel in the first place, the hike that was to be implemented by January 1, 2006 saw the light of the day only from January 1, 2008, making the government’s arrears payment that much larger.

Secondly, the 6th pay commission recommended a hike of 20 percent but UPA government had given unilaterally a hike of over 40 percent. The 7th Pay Commission recommended a hike of 14.27 percent, but Modi Government didn’t increase it and went with ditto to the 7th Pay Commission, which makes a big impact on arrears.

Thirdly, the arrears can make the impact on employees finances not the regular pay hike.

Fourthly, Dearness Allowance (DA) was counted fifth times in the calculation of the pay hike back in 2008, making the actual bigger the employees finances.

The arrears of hike in basic pay is usually only paid. No arrears for allowances (except Dearness Allowance) is paid, as per usual practice, the allowances is paid from the date of implementation.

The arrears of hike in basic pay under the 7th pay commission recommendation shall be paid during this financial year 2016-2017, says the notification.

However, Finance Minister Arun Jaitley said, “the Cabinet will decide if the arrears have to be paid in one go or in installments.”