# 7th Pay Commission on allowances: Here is how to calculate salary of employees

Updated: June 30, 2017 11:04:18 AM

## 7th Pay Commission on allowances: The implementation of 7th Pay Commission recommendations is now going to become visible.

7th Pay Commission on allowances: The implementation of 7th Pay Commission recommendations is now going to become visible. However, still there exist issues in terms of disbursement of arrears and allowances. It has been observed that the implementation of the commission’s recommendations earlier were very time consuming. However, 7th CPC recommendations have been implemented within six months from the due date. On the other hand, the key aspect is that how efficiently and timely the disbursements of the allowances are being made to the Central employees. Generally, when Central pay commission is implemented, it takes about two years for the disbursement of all allowances.

As far as the salary structure is concerned under 7th CPC, the present system of Pay Bands and Grade Pay has been dispensed and a new Pay Matrix is introduced. In this regard, separate Pay Matrices have been drawn up for Civilians, Defence Personnel and for Military Nursing Service. The CPC has introduced index of rationalisation for arriving at minimum pay in each Level of the Pay Matrix depending upon the increasing role, responsibility, and accountability at each step in the hierarchy. In this context, CPC has enhanced the minimum pay from Rs 7000 to 18000 per month and the starting salary of a newly recruited employee at lowest level is now Rs 18000 whereas for a newly recruited Class I officer, it is Rs 56100.

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Under 7th Central Pay Commission (CPC), the salaries of the employees are obtained by multiplying the existing basic pay by a factor of 2.57 and the figure so arrived will be added to all the applicable allowances such as Transport Allowance (TA), House Rent Allowance (HRA), Medical Allowance, etc. The hypothetical example of calculating an employee’s salary as per 7th CPC is illustrated below:

A. Basic pay of an employee as on 1st January 2016 is Rs 20,000

B. Multiply basic pay by 2.57 fitment factor = Rs 20,000 x 2.57 = Rs. 51,400

C. Addition of TA, HRA, medical Allowances as applicable and according to the revised rates of allowances approved by the Government etc to the amount Rs 51,400

D. New Pay = (Basic pay (as on 1st Jan 2016) x 2.57)+ All Allowances as per to the revised rates by the Government

7th CPC has come into effect since Jan 2016 and is presently running in its second year. The recently approved modifications by the government in regards to recommendations of the 7th CPC on allowances are going to be effective since 1st July 2017. It is expected that all the disbursements will be made gradually by the Central government by end of this year.

It is also anticipated that with the additional income in the hands of central employees may give a boost to consumer goods manufacturing coupled with good monsoon season as forecast by the India Meteorological Department (IMD), favourable inflationary scenario and GST implementation leading to reduced inputs costs in the coming times. In a nutshell, with timely disbursements of allowances to employees, it is expected that the demand and consumer spending in the economy will be boosted and likely to witness a huge push in terms of manufacturing activity, creation of jobs, revenue generation and would boost the overall growth sentiments, going ahead.

By Dr S P Sharma, Chief Economist, PHD Chamber of Commerce & Industry

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