The 7th Pay Commission windfall for sarkari babus has a lot of ifs and buts attached to it, not to mention innumerable slabs and a plethora of other parameters, thereby confusing the beneficiaries. We take this opportunity to cut through to the real meat in the report that was cleared by the Narendra Modi government last week. Here are the top 5 key takeaways.

1. 7th Pay Commission stimulus to private consumption would be some Rs 46,800 crore, or 30 basis points (bps) of GDP, according to an analysis done by Kotak Economic Research. The government will get an additional tax revenue of Rs 13,000 crore and households would be able to save Rs 25,000 crore.

2. On the 7th Pay Commission, the government will be spending an additional Rs 84,900 crore on pay and pensions in FY17. Of this, the Union Budget will bear Rs 60,600 crore, while the Indian Railways will bear Rs 24,300 crore.

3. A major difference between the 7th Pay Commission and previous pay commissions is that there is hardly any lag between the time of recommendation and implementation. As a result, the size of the arrears to be paid will be much lower compared to the payouts of the Fifth and Sixth Pay Commissions.

4. Now that the central government has accepted the report of the Central Pay Commission, state governments will follow suit after a gap of six months to a year. States are likely to increase expenditure by 1.5% of GDP towards salaries and pension, which would further stimulate private consumption over the next couple of years.

5. As far as the deferred part is concerned, in the 7th Pay Commission order, government has deferred the allowances for another four months, which would be implemented prospectively. However, that is not expected to stand in the way of spending splurge, because an increase in private spending post 7th Pay Commission windfall is expected to push up demand for consumer durables and automobiles.

Source : http://www.financialexpress.com/

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New Delhi: The Modi government’s decision to accord the 7th Pay Commission recommendation to hike salaries and allowances for central government employees has met with strong resistance from central government employees’ trade unions, including the RSS-affiliated Bharatiya Mazdoor Sangh (BMS).

The Union Cabinet approved the recommendations made by the 7th pay commission on June 29, which is likely to see a higher increase in the basic pay by average 14.29 percent, which is the lowest in 70 years.

The minimum monthly pay has been increased from Rs 7000 to Rs 18,000.

The central government employees Unions leaders on the same day said the approved hike was lowest in many decades and were not in sync with inflation. They also said it is “totally disappointing and beats logic”.

Accordingly, they rejected the 7th Pay Commission approved by the government and threatened to go on indefinite strike from 6 am, 11 July.

The central government employees unions have been demanding Rs 26,000 as minimum pay instead of Rs 18,000 approved by the government based on the 7th Pay Commission’s recommendations.

“Now, Basic pay Rs 7,000 plus dearness allowance (DA) Rs 8,750 makes the minimum wage Rs.15,750. They have increased it to Rs.18,000,” a central government employees’ union leader said.

“When you are doing away with DA in the new system, the hike may be just Rs.2,250,” another union leader said.

Under pressure from the unions, the government has indicated that it may increase the minimum pay of central government employees beyond the Rs.18,000 suggested by the 7th Pay Commission, seeking to defuse a strike threat.

Acoordingly, Finance Minister Arun Jaitley met with representatives of central government employees unions at Home Minister Rajnath Singh’s house for two hours till 11pm, a day after the cabinet cleared 7th Pay Commission award for its employees.

Jaitley, Rajnath Singh, Railways Minister Suresh Prabhu and Minister of State for Railways Manoj Sinha attended the meeting and assured unions leaders of central government employees that their demand would be looked into.

“The ministers called us and we have been assured that the minimum pay issue is going to be referred to one of two committees that the government is setting up to rectify any anomalies in the pay commission recommendation implementation,” Shiv Gopal Mishra, General Secretary of the National Joint Council Action (NJCA), a confederation of 3.3 million government employees, told reporters after the meeting.

The increasing the minimum pay will change the salary fitment factor. If the minimum pay is hiked from Rs.18,000 to even Rs.25,000, the fitment factor will be higher than the 2.57 times approved by the government based on the pay commission recommendations.

If the 2.57 fitment formula is tinkered with, then salary and pension in general for all central government employees will go up.

The Cabinet ditto with the 7h Pay Commission recommendations, the commission recommended for raising minimum pay to Rs 18,000 per month from current Rs 7,000 while the maximum pay, drawn by the Cabinet Secretary, was recommended Rs 2.5 lakh per month from current Rs 90,000. For the Secretaries it was recommended at Rs 2.25 lakh as against Rs 80,000 currently.

All pay commissions made up pay gap between lower paid employees and top officers from second Pay Commission 1:41 ratio to Sixth pay commission 1:12.

The first pay commission was recommended pay of the top bureaucrats 41 times higher than the government employees at the bottom. The top bureaucrats were given salary Rs 2,263 while the lowest earning employees got Rs 55.

Subsequent pay commissions reduced the ratio of pay between lowest earning employees and top bureaucrats from 1:41 in 1947 to about 1:12 in 2006.

The 7h Pay Commission increased the pay gap between the minimum and maximum from existing 1:12 to 1:13.8

The pay gap increases employee’s turnover and work-related illness, with all the associated economic consequences.

The bureaucrats with high pay are generally happier, healthier and a better place to live for almost everyone in them compare to the lower earning employees.

A pay gap is calculated as the ratio of the pay of the highest paid employee of an organisation to the pay of the average or lowest paid employee in that organisation.

Speculations were rife that the central government employees unions may defer the July 11 indefinite strike after government heeded to their demand of increasing minimum pay to over Rs 25,000 from Rs 18,000 fixed after considering the recommendations of the 7th Pay Commission.

Under the fitment formula, the government multiplied the minimum wage of Rs 7,000 fixed in the last pay commission with 2.57 and arrived at a minimum pay of Rs 18,000 per month.

The employees are demanding for the fitment formula of 3.68, which will result in minimum monthly pay of Rs 25,760.

Finance Minister Arun Jaitley has already promised to consider to hike the minimum pay of central government employees beyond Rs 18,000.

Source : https://www.tkbsen.in/

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New Delhi: The notification on 7th Pay Commission might be issued next week and the government employees will start receiving new pay cheques from this month.

The top Finance Ministry officials on Thursday said that notification in this regard is expected to be issued next week.

The union cabinet had on Wednesday approved the he long-awaited 7th pay commission Report’s recommendations hiking salaries of central government employees as well as pensions.

Initially, the public servants will be able to draw the hiked part of their basic pay and they will start receiving the hiked allowances five to six months later.

For example, employees belonging to the minimum pay of the existing 6th Pay Commission scale had so far been drawing a Rs 7,000 basic salary plus allowances. From July, their basic pay will rise to Rs 18,000, but their allowances will remain the same until the committee headed by the Finance Secretary to announce new allowances.

The officials said since the pay scale will be made effective retrospectively from January 1 this year, the public servants will be able to claim their arrears from the day after the notification is issued.

After the cabinet meeting, the Finance Minister Arun Jaitley said government salaries have to be competitive with the private sector, for which the Commission had engaged IIM-Ahmedabad to make the comparison.

“This will attract best talent in the government sector,” said the minister.

However, as per the cabinet approval, the minimum pay is now Rs 18,000 and maximum is Rs 2.5 lakh, but ideally the minimum should have been 1/10th of the maximum, the employees’s union leaders claimed.

The Cabinet ditto with the 7h Pay Commission recommendations, the commission recommended 23.55 per cent hike in salaries, allowances and pensions and a 14.27 per cent increase in basic pay for Central government employees, the lowest in 70 years.

The central government employees are in for disappointment as the cabinet approved a 14.27 per cent hike in basic pay, which is significantly lower than what the 6th pay commission had recommended. Sixth Pay Commission had recommended a 20 per cent hike in basic pay which the government doubled while implementing it in 2008.

The Congress and the Left parties Thursday came out in support of the indefinite strike from July 11 call given by central government employees’ unions to protest the “inadequate” hike in their salaries. While the Congress said the hike was the worst in the last 70 years, the CPM said it was “disappointing.”

Source : tkbsen.in

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Union representatives meet Arun Jaitley, Rajnath Singh and Suresh Prabhu, demanding increase in minimum monthly pay beyond Rs18,000 suggested by Seventh Pay Commission

New Delhi: Under pressure from the unions, the government has indicated that it may increase the minimum monthly pay of central government employees beyond the Rs.18,000 suggested by the Seventh Pay Commission, seeking to defuse a strike threat.

The assurance has divided several government unions on whether to go ahead with the indefinite strike starting 11 July.

Three cabinet ministers—finance minister Arun Jaitley, home minister Rajnath Singh and railway minister Suresh Prabhu—met representatives of several government staff unions late on Thursday for almost two hours and assured them that their demand would be looked into.

The unions have been demanding Rs.26,000, higher than the Rs.18,000 approved by the cabinet on Wednesday on the Seventh Pay Commission’s report. The government said it was more than doubling minimum pay from Rs.7,000 after accepting the recommendations of the commission, which would put an extra Rs.1.02 trillion in the hands of 10 million government employees and pensioners.

“Three top ministers called us and we met at Rajnath Singh’s house for two hours till 11pm last night. We have been assured that the minimum wage issue is going to be referred to one of two committees that the government is setting up to rectify any anomalies in the pay commission recommendations’ implementation,” said Shiva Gopal Mishra, general secretary of the National Joint Council of Action (NJCA), a confederation of several government staff unions.

The council claims a membership of 3.3 million, including workers of Indian Railways, the country’s largest employer.

Mishra said Jaitley accepted their concern. “He said the government will try to rectify some of our demands, including minimum wage,” the NJCA general secretary said.

Union leaders claimed that the pay commission’s recommendation and the government’s announcement raising minimum pay from Rs.7,000 to Rs.18,000 had glossed over the fine print.

“Now, base pay plus dearness allowance (DA) makes the minimum wage Rs.15,700. They have increased it to Rs.18,000,” said K.K.N. Kutty, national president of the Confederation of Central Government Employees and Workers.

“When you are doing away with DA in the new system, the hike cannot be just Rs.2,000,” said C. Srikumar, general secretary of the All India Defence Employees Federation, a union of civilian workers in factories and establishments under the ministry of defence.

Mishra said the home minister assured them that “their interaction with us has the blessings of PM Narendra Modi”.

“On minimum wage, we are for a negotiated settlement and it seems there is some consideration at the highest level,” he added.

An office-bearer at an employees’ union said the government’s offer had posed a dilemma to union leaders, noting that it wasn’t a written assurance, “without which it will be tough to accept that the government is indeed serious in reworking the minimum wage”.

The offer had ended up dividing the unions on whether to proceed with the strike, this person said on condition of anonymity. “And we could not reach a conclusion on Friday on our next course of action,” he said, adding that the railway workers’ union was hesitant about going on strike.

Mishra, who is also the general secretary of All India Railwaymen’s Federation, sounded a conciliatory note.

“We are fighting for the welfare of our own workers…a strike is an option if government does not listen to us. There seems to be a political willingness to solve what we are demanding and that’s what was indicated last night,” Mishra told reporters in New Delhi.

On Friday, NJCA wrote to all unions that “government has proposed to refer the issue of minimum wage and fitment formula (for calculation of salary) to a committee for reconsideration. The NJCA will await communication in this regard from the government”.

It said that it will meet on 6 July again to decide on the proposed strike.

What is interesting is that increasing the minimum pay will change the salary fitment calculations. If the minimum wage is hiked from Rs.18,000 to even Rs.20,000, the fitment rate will be higher than the 2.57 times approved by the government based on the pay commission recommendations.

“If the 2.57 fitment formula is tinkered with, then salary and pension in general for all segments of employees will go up, putting further stress on the exchequer. So the government has to walk a fine balance and a lot of homework is required,” said a government official, who declined to be named.

The acceptance of the pay commission recommendations is a potential boost to the consumer economy.

A further hike could lift consumption further, but it will be tough on government finances, the official said.

Rating agency India Ratings and Research Pvt. Ltd said the gross impact of pay hike on the economy is likely to be Rs.94,775 crore.

“The central government will receive income tax on this payout and collect excise duty on consumption, after sharing the increase in income tax and excise duty with states. Thus the net impact on the central government finances is estimated to be Rs.80,641 crore,” said D.K. Pant, chief economist of India Ratings and Research.

Source : http://www.livemint.com/

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New Delhi, June 29 (IANS) The Union Cabinet, which on Wednesday announced implementation of the 7th Pay Commission, has decided to constitute three separate committees, including one to look into the anomalies likely to arise out of enforcement of the commission’s Report.

“The two separate committees constituted includes for suggesting measures for streamlining the implementation of National Pension System (NPS) and to look into anomalies likely to arise out of implementation of the Commission’s Report,” said the statement.

The cabinet approved the Seventh Pay Commission Report’s recommendations for central government employees, which will impact the some 47 lakh central government employees and 53 lakh pensioners.

The cabinet has also constituted a committee to address the implementation issues vis-a-vis revision of pension.

“The general recommendations of the Commission on pension and related benefits have been approved by the Cabinet. Both the options recommended by the Commission as regards pension revision have been accepted subject to feasibility of their implementation,” an official statement said.

Source : http://www.canindia.com/

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