Central government employees and pensioners are eagerly awaiting the final notification of the 8th Pay Commission. Meanwhile, besides speculations around the possible fitment factor and percentage increase in the overall salary of employees and retirees, the big question on the minds of many employees is whether many of the existing allowances in the new pay commission will be abolished.
In fact, at the time of the 7th Pay Commission (7th CPC), a large number of allowances were reviewed, and many were abolished. This time also, the government can take steps towards doing ‘simplification of allowances’, according to experts. This simply means that allowances that do not have any relevant use today or that create a state of repetition can be eliminated.
What happened to the 7th Pay Commission?
The 7th Pay Commission reviewed the allowances, found that there are about 196 allowances. There were many of them whose purpose was either the same or whose influence was very limited. The Commission had recommended abolishing 52 allowances and incorporating 36 into various allowances. After this, the government abolished a large number of allowances and gave some new names and structure to some.
What is being expected from the 8th Pay Commission?
The same process can be repeated in the 8th Pay Commission. Experts believe that this commission can work on the principle of “less allowance, but more transparency”.
Such allowances that have now become irrelevant due to digitalization and new administrative system can be abolished.
Allowances with similar nature can be integrated so that the complexity is reduced.
Basic salary and DA (Dearness Allowance) can be given more importance in employees’ salary package, while small allowances can be removed.
Which allowances can be affected?
There is no official information yet, but it is estimated that travel allowance, special duty allowance, small level regional allowances and some specific departmental allowances (such as old -time typing/clerkial allowance) can be abolished. Like the 7th Pay Commission, this time also the government wants “rational and simple” salary structure.
What will be the effect on employees?
Lower allowance does not mean that the total income of the employees will decrease. Typically, the government balances the basic salary or DA along with removing the allowances. This also has a positive effect on the pension of the employees, because the pension is calculated on the basic pay + DA, not on different allowances.
8th Pay Commission update
The Centre has remained tight-lipped about any progress in the 8th Pay Commission matter. The Terms of Reference (ToR) finalisation and appointment of members and the chairman of the panel are still awaited. ToR serves as a framework for the pay commission and helps it come out with recommendations on salary structures, allowances and other benefits for government employees. So in the absence of ToR, the commission lacks direction and cannot begin its functions.
The Modi government in January this year announced the 8th Pay Commission and moved ahead with related processes to invite suggestions and consult various stakeholders to finalise the ToR. It was expected that the ToR exercise would be completed before April 2025, and subsequently, the panel members would be appointed and the final notification would come.
Summing up…
The 8th Pay Commission may not have been officially notified yet, but the indications are clear that the government will once again try to simplify the ‘allowance structure’. As a result, the salary structure of government employees will look more transparent and systematic in the coming years, but many old allowances will become history.