7th Pay Commission: Features & Benefits

Many crave a government job not only for job security but also because of several other benefits such as paid holidays, fixed working hours, retirement & tax benefits and pay structure. Our Indian Government has been directly employing millions of citizens in various posts. So, for such purposes, the government has set up a separate pay commission since independence to monitor, review and recommend any possible modifications to the salary structure of government employees periodically, that is, after every 10 years. 

The said modifications cover not only the basic salary but even the allowances, benefits (either monetary or non-monetary), bonuses, amenities, etc. This article discusses the 7th pay commission, its pay matrix and the implementation of the 8th pay commission by next year if approved. So let’s get started.

What is a Pay Commission?

• The Government of India set up the Pay Commission to recommend changes in the salary structure of central government employees. Until now, seven pay commissions have been set up. 

• The present pay commission structure looking out for the salaries of government employees, including other benefits, is the 7th pay commission introduced in 2016 from the beginning of the year on 1st January after the recommendations were approved on 29th June 2016.

• However, the salary revision of central government employees, which has been in discussion for a long-time now, is likely to be done in the next pay commission (the 8th pay commission).

• The government believes that the salaries of government employees must be increased every year instead of every 10 years. Every decade, a new pay commission is formed to increase the salary of central government employees based on the fitment factor (Pay band and grade pay). 

• This 10-year phenomenon deprives govt. employees of a lower level of a proper hike, unlike higher officers.

History of Central Pay Commission

The history dates back to the 1940s, with the establishment of the first Pay Commission in 1946. This Commission recommends the basic pay, allowances, and retirement benefits for Central Government employees & pensioners. The recommendations are implemented after every ten years, which significantly impacts these employees.

• The 1st Pay Commission (1947-1958), recommended pay scales with a minimum salary of Rs. 55 and a maximum salary of Rs. 2000. There were 150-30 pay scales.

• The 2nd Pay Commission (1959-1972), recommended pay scales with a minimum salary of Rs. 80 & a maximum salary of Rs. 3000. There were 500-140 pay scales.

• The 3rd Pay Commission (1973-1986), recommended pay scales with a minimum salary of Rs. 196 & a maximum salary of Rs. 3500. There were 500-80 pay scales.

• The 4th Pay Commission (1987-1995), recommended pay scales with a minimum salary of Rs. 750 & a maximum salary of Rs. 8000. The compression There were 153-36 pay scales.

• The 5th Pay Commission (1996-2005), recommended pay scales with a minimum salary of Rs. 2550 & a maximum salary of Rs. 26000. There were 51-34 pay scales.

• The 6th Pay Commission (2006-2015), recommended pay scales with a minimum salary of Rs. 7000 & a maximum salary of Rs. 80000. There were 35-19 pay scales and a 15-grade pay structure.

• The 7th Pay Commission (2016-2025), recommended pay scales with a minimum salary of Rs. 18000 and a maximum salary of Rs. 250000. The pay matrix table was a simple pay scale table drawn with 19 stages, i.e.; 540 out of 760 cells.

• The 8th Central Pay Commission pay scales is to be established from 2026-2035, the expected minimum and maximum salary, compression ratio, and pay matrix is not known. 

Let’s discuss the 7th Pay Commission in detail.

What is 7th Pay Commission?

In July 2016, AK Mathur headed the Seventh Pay Commission and submitted a report to Finance Minister Arun Jaitley which suggested a 23.55% hike in pay and allowances of central government employees. This means that If the 7th pay commission is implemented, government employees will receive benefits from pay hike etc. The GOI then planned to implement the 7th Pay Commission's recommendations by January 2017. Under 7th pay commission, salary is decided by pay matrix which is linked to the fitment factor. 

How is the salary computed as per the 7th pay commission?

There are several 7th Pay Commission calculators available to calculate the salary structure of the employees. One of the methods are:

• Enter Basic Pay along with the Pay Band and Grade Pay (fitment factor)

• Select transport allowance, and location with the current HRA percentage

• Select ‘Calculate’

• The above method will generate the revised salary structure in accordance with the 7th Pay Commission recommendations.

What are pay band and grade pay?

The pay band is a part of the salary process used to rank various jobs by education, responsibility, location, etc. Like in specific sectors, a minimum and the maximum salary range is decided in accordance with their work experience or work profile. Grade pay is a level that an employee holds on the scale of remunerations such as managerial pay grade, executive pay grade etc.

So, with around one year left for the 8th Pay Commission formation, the government may introduce a new formula for salary revision for employees or pensioners. This issue can also be discussed in the upcoming budget.

What is the basic pay in the 7th pay commission?

As per the pay matrix, the basic pay has been increased from Rs. 7000 to Rs. 18000 with maximum recommended pay fixed at ₹2,25,000 & for apex positions such as cabinet secretary and others in the same level, the pay begins at ₹2,50,000. (Refer to the table below for a better understanding)

Let’s read thoroughly about the pay matrix.

7th Pay Commission pay matrix

According to the 7th Pay Commission, The pay matrix had replaced the existing Grade pay and pay band system, as mentioned below in the table. However, this pay matrix is linked to the fitment factor. This pay matrix has been formed on the basis of levels which implies the hierarchy in simple words such as entry-level, officer level etc. The fitment factor (Pay band and grade pay) has changed from 2.57 to 2.67 to a particular level, and the pay hierarchy has also changed under this commission. Let’s check the pay matrix table for employees of the Central Government under 7th pay commission:

FYI: PB refers to the Pay Band & New levels in this table replace existing level of Grade Pay.

1. Existing PB-1 (Rs. 5200 to 20200)

2. Existing PB-2 (Rs. 9300 to 34800)

3. Existing PB-3 (Rs. 15600 to 39100)

4. Existing PB-4 (Rs. 37400 to 67000)

5. These levels had no Grade Pay but only pay bands; these levels include HAG (Higher Administrative Grade), HAG+, Apex positions such as Cabinet Secretary, and Defence Chiefs levels.

Will there be 8th Pay Commission?

The 8th Pay Commission is expected to come in 2024, which will review and make recommendations on the remuneration and benefits of government employees, including civil servants and military personnel. The recommendations of the 8th Pay Commission are expected to be implemented in 2026.

What the employees mainly expect from the 8th pay commission is that the 7th Pay Commission with an overall hike in pay scales for government employees. Plus this could include a 25% to 30% rise in basic pay for central government employees and a 25% increase for pensioners. The pay scale hike will help improve the standard of living for government employees and benefit the economy.

Important- This 8th Pay Commission will introduce a new pay matrix. This pay matrix will replace the existing pay matrix of the 7th pay commission and will simplify the pay structure. According to the reports, if the 8th pay commission is approved, government employees' minimum wage will increase from Rs 18,000 to Rs 26,000.