Tuesday, December 8, 2015

VII CPC RECOMMENDATIONS ARE FAR BENEFICIAL THAN ALL THE PAY COMMISSIONS SO FAR EXCEPT FEW FLAWS

Financial benefits to be reaped by central government employees through the recommendation of seventh central pay commission are going to be in leaps and bounds :

Criticizing the recommendations of the VII Central Pay Commission without fully studying the report and jumping to the conclusion that the pay commission has done injustice to the central government employees is not fair.

The Seventh Central Pay Commission have done an excellent job by presenting the VII CPC Report within the scheduled time and without much anomalies that were vastly found in VI CPC Report. Abolition of Pay Band and Grade Pay System deserve appreciationPay matrix have been worked out with brilliance which provide minimum entry scale as well as fitment table for existing employees according to the increments drawn unlike the 3 methods of fixation adopted by VI CPC among new recruits, promotees and existing employees which caused great disparity and anomaly in pay fixation. The hike granted is also quite substantial which in fact is more than what VI CPC had granted.
While the increase granted by VII CPC actually come to 32% of the pre-revised existing Basic pay, the increase is projected as 15% wrongly by the media including the VII CPC in its comparison table which unnecessarily have been paving the way for resentment and unrest among the central government employees who would not have fully studied the report. While projecting the percentage of increase the VI CPC,had taken into account only the basic pay . Whereas the VII CPC had reckoned D.A. element also to project the percentage of increase which gives a wrong picture of around 15% hike.

A clear analysis of the recommendations shall throw insight on the vast financial  benefits that the central government servants are going to reap for years to come. Let me analyse the salient features of the recommendations thread bare in an unbiased mind to present a true picture:

1. Basic Pay:
The VII CPC has arrived at a factor of 2.57 for multiplication with the pre-revised pay and pay band to arrive at new Basic Pay. While the pre-revised Pay in the pay band and Grade Pay is to be deemed as 100%, the D.A. as on 1/1/2016 constitute 125% totaling to 225% in other words 2.25 factor. This is the actual Pay, Grade Pay and D.A, a government servant would be drawing as on 1/1/2016 under the VI CPC pay pattern. The VII CPC added 32% hike uniformly to all the employees as fitment benefit to the existing pay and grade pay and raised it to 257% or 2.57 factor.

What is to be noted here is although the VI CPC had granted 40% of the maximum of the basic pay scale of the pre-revised V CPC pay as fitment benefit and shown it separately as Grade Pay, yet the present hike of 32% in pay and grade pay is more than that because the existing basic pay containing pay and grade pay already contain 1.86 factor +40% fitment benefit offered by V CPC i.e. 72% D.A as on 1/1/2006, in other words 86% D.A as on 1/1/2006(i.e 50% Dearness Pay and 24% DA and 24% D.A on 50% D.P which come to 12% totaling to 86% plus Grade Pay of 40% totaling to 226 or 2.26 factor Therefore virtually 32% of increase presently granted by VII CPC on the 6th CPC Pay consisting of 1.86 factor plus Grade Pay of 40% totaling to 226 or 2.26 factor actually come to 72.32% hike (226 x 32% = 72.32%) when we have to compare the hike of VII CPC with VI CPC and in terms of the amount.

2. Dearness Allowance:
The VII CPC had rightly added 6% D.A. notionally for the period 1/7/2015 to 31/12/2015 to the existing 119% D.A and merged 125% of D.A. on the pre-revised pay and Grade Pay in its revised Basic pay. What is more – the future D.A payable every 6 months as per the All India Consumer Price Index is going to be calculated retaining the same formula of 115.76(Base year 2001=100). Continuance of D.A calculation formula as per the existing rate for the revised Basic Pay which include 125% of D.A as on 1/1/2016 and 32% fitment benefit certainly is going to increase the salary level hugely as the D.A. increase every 6 months may continue to be in the range of 6% to 7%.

3. House Rent Allowance: Although the existing percentage of HRA has been reduced to 0.8 factor i.e. to 80 percent which comes to 24%, 16% and 8% for the X, Y and Z cities respectively, yet there is more than 100% increase in the present HRA rate as a result of payment of HRA on the revised basic pay which include 125% D.A. and 32% fitment benefit totaling to 257 or 2.57 factor. The percentage of increase of HRA come to 61.68% of the existing pre-revised pay and grade pay for X cities which carry only 30% at present(257 x 24%=61.68). The HRA come to 41.12% of the existing pre-revised pay and grade pay for Y cities which carry only 20% at present(257 x 16%=41.12).. Similarly the HRA come to 20. 56% of the existing pre-revised pay and grade pay for Y cities which carry only 10% at present(257 x 8%=20.56).. Thus the present hike in HRA is more than 100% of the existing HRA amount drawn. Further when D.A crosses 50% HRA will be raised to 27%, 18% and 9% and when D.A. crosses 100% HRA will be raised to 30%, 20% and 10%. It must be seen that HRA rate recommended by VII CPC at present itself is very huge.

4. Transport Allowance:
125% of D.A. as on 1/1/2016 have been merged to the existing slab and revised Transport Allowance slabs have been arrived at on exact basis. For example the Transport Allowance after merger of D.A to the existing slab of Rs.3200, 1600 and 600 gets raised to 7200, 3200 and 1350 respectively. Further The D.A gets added once in every 6 months as per the CPI index. Therefore there will be steep increase in Transport Allowance amount every 6 months as the D.A rate enhances.

5. Annual Increment: Retaining 3% increment is quite okay because the 3% increment is granted on revised basic pay which constitute pay, grade pay D.A. at 125% and 32% hike in the existing basic pay as fitment benefit. Of course the benefit is marginal only from the existing monetary benefit that accrue on increment.

6. Children Education Allowance: Hiked by 25% i.e. to Rs.2250 per month with simiar rise in hostel fee.

7. Child Care Leave: Recommended for single male parent also. 80% salary for the next 365 days of the total 730 days is a welcome measure to discourage misuse of Child Care Leave.

8. House Building Advance raised from a meager limit of 7.5 lakhs to 25 lakhs.

9. Group Insurance Scheme: Increasing Group Insurance limit to such a stupendous level of Rs.50.00 lakhs, 25 lakhs and 15 lakhs shall provide adequate succor to the bereaved family of the government servants who die while in service.

10.Retirement Benefits:

i. Pension: 32% hike in the basic pension(2.57 factor) with one more option for ensuring equal pension for equal number of years of service as in the case of defence which perhaps was not demanded by any central government employees forum is a milestone of the recommendation.

ii. Gratuity:
Retention of Gratuity at 16.5 months of revised basic pay and D.A . shall increase the take home gratuity amount. Doubling of Gratuity amount from Rs.10.00 lakhs to Rs.20.00 lakhs with provision for raising the Gratuity limit by 25% when D.A. crosses 50% i.e. to Rs.25 lakhs is a great relief to middle level and higher level employees whose remuneration for 16.5 months are much higher than the existing Rs.10.00 lakhs and who would be saved from losing several lakhs as a result of enhancement of gratuity limit.

iii. Commutation of Pension: Retention of Pension commutation at 40% of the revised basic pension which stands increased by 2.57 times as a result of merger of 125% D.A and 32% fitment benefit shall correspondingly increase the take home pension commutation by 2.57 times. For example, an employee who may be otherwise getting only Rs.5.00 lakhs as pension commutation on the existing Pay+Grade Pay under VI CPC recommendation, may get Rs.12.85 lakhs as pension commutation under VII CPC recommendation.

iv. E.L. encashment: Retention of E.L encashment at the existing 300 days is also a welcome gesture.

Surely there will be 60 to 70 percent increase in the overall take home retirement benefits when compared to the existing retirement benefits
All these monetary benefits recommended by the VII Pay Commission, shall definitely provide an insight about the genuine concern of the Hon’ble Chairman and the Members of the VII Pay Commission to improve the financial  situation of the central government employees. The criticisms raised against the Pay Commission’s recommendations are totally unwarranted.

SOME FLAWS OBSERVED IN THE RECOMMENDATIONS WHICH NEED RECTIFICATION BY GOVERNENT:

1. Retention of 3% increment on basic pay in case of promotion leads to lower financial benefits than the existing benefits:

In the matter of increment on promotion, the Chairman and the Members of the VII CPC have erred, since the financial  benefit would be much lower than what a government servant would have got under VI CPC recommendation on promotion, because the existing benefit on promotion carry change in grade pay apart  from 3% increase in Pay+Grade Pay. The following illustration shall show the huge difference:

Suppose an employee whose Pay is Rs.24210/- and the Grade pay is Rs. 5400 totalling to Rs.29610(in the Pay band of 15600-39100), gets his next promotion to the Grade Pay of Rs.6600/- he will be entitled to the following hike in total remuneration under the existing VI CPC recommendation:

Rs.29610 x 3% increment =Rs.890
Difference in Grade Pay from Rs.5400 to Rs.6600= Rs.1200
Total increase of increment in basic pay and Grade Pay= Rs.2090

D.A. at 125% as on 1/1/2016 on Rs.2090 = Rs.2613
HRA at 30%(assuming X city) on Rs.2090 =Rs.627

Total monetary benefit = Rs.5330/-

Whereas the net monetary benefit under VII CPC recommendation, as a result of promotion in the above case will be much lower than the above illustraion as shown under:

Equivalent Basic Pay for Rs.29610 come to Rs77700 as per pay matrix

Rs.77700 x 3% increment =Rs.2331(rounded to 2300)

D.A. at 0% as on 1/1/2016 on Rs.2300 = 0

HRA at 24%(assuming X city) on Rs.2300 =Rs.552

Total monetary benefit = Rs.2852/-only as against the existing Rs.5330/- leading to shortage of Rs. 2478/- This is a big blunder committed by the VII Pay commission.

Therefore the increment on promotion should be atleast 5 to 6% to bring the benefit of increment on promotion to the existing level.

2. Non recommendation for merger of 50% of D.A. with basic pay when D.A. crosses 50% is a great disappointment:

The long standing demand of the central government employees for merger of 50% D.A with basic was not implemented by the government on the excuse that the VI CPC had not made such a proposal. The VII CPC is totally silent about this aspect. It appears no one has demanded the same before the VII CPC for consideration.
It is quite surprising that such a vital issue of non-recommendation of merger of D.A with basic pay when D.A crosses 50% is not being opposed by any central government associations or pointed out by the the media. Had it been recommended by the VII CPC, the government would have implemented the same and the benefit of hike in salary as a result of merger of D.A with basic when it cross 50%, would be so vast that no government servant would crave for a need for timely setting up of next VIII Central Pay commission.

3. Disparity in fitment factor among existing and new recruits at various pay levels:

The grant of higher percentage of fitment benefit to new recruits at 2.62 factor(37% increase on Pay+Grade Pay), 2.67) factor(42% increase on Pay+Grade Pay) and 2.72 factor(47% increase on Pay+Grade Pay) etc., is reminiscent of VI Pay Commission’s recommendations which led to disparity among promotees and new recruits. Uniform method should have been adopted. There are chances of persons with more service in a particular pay level getting equal salary with his junior by one or 2 year. This needs rectification.

4. Likely disparities in pension fixation whereby junior may get more pension than the seniors as a result of recommendation under option 2:

The VII CPC has recommended a factor of 2.57 for multiplication of existing basic pension to arrive at revised basic pension. This of course shall not lead to any disparity in pay fixation.

Where as the 2nd option to get the pension fixed as per the number of increments drawn in the particular pay level prior to retirement, may result in great disparities whereby the juniors may get much more than senior pensioners who retired in a higher pay with more basic pension, but with less number of service in the promoted post which he would have held at the time of retirement. Because for arriving at pension under the 2nd option, only the number of years served by a government servant in the particular level of pay at the time of retirement should be taken into consideration as per VII CPC recommendation for exercising the second option.
Therefore in order to arrive at a correct picture to ensure equal pension for civilians for equal number of years, the number of years of service at various level should be taken into account in all the levels from the date of joining the government service till retirement.

5. Suggestion of the Chairman, VII CPC, to do away with setting up of future central pay commissions and give proportionate hike annually to avoid financial burden is a wrong proposal:

The Pay Commissions are set up by the government, to look into the current salary structure and to recommend the hike needed in the pay and other allowances on the basis of  the current economic scenario. The Pay Commissions recommendations are not meant for providing financial  benefit for the past 10 years, but for future 10 years. The additional financial  implication of about Rs.1,02,100 crore i.e. 23.55% in the existing financial liability for implementation of the recommendation is only for one year. i.e.2016-17 which proportionately gets increased every year for the next 10 years. Therefore the suggestion of the Chairman to do away with setting up any more pay commissions and instead to grant proportionate rise in salary every year is a big flaw. It is not clear what the Hon’ble Chairman of the VII CPC really want to suggest. Such a suggestion really shall baffle all the financial experts since the very quantum of additional increase in salary every year comes on the basis of recommendation of the pay commission. Does the Chairman suggest to government to grant further increase in salary every year over and above what the VII CPC have recommended?

6. Questions that need to be answered by the Pay Commission/Government:

a). While adequate amount is provided out of the minimum basic pay of Rs.18,000/-for monthly food items for 3 persons of a family unit which is quite sufficient even for 6 members in a family, but adequate provision is not made towards house rent and educational aspects. The House Rent admissible in X Cities at 24% for Rs.18000/- comes to only Rs.4320/- No family can get a good accommodation for this rate even in Z category cities. There should be a minimum of at least Rs.8000/- as House Rent Allowance in X category cities and a maximum ceiling of Rs.25000/- should be imposed, since persons in higher basic pay stand to get hefty amount as House Rent Allowance which is not advisable.

b). There is no point in granting Children Education Allowance only upto 12th Standard. Any one with 12th Std. qualification can at the most go for a helper job or MTS in government offices. Certainly no welfare government will have such a narrow concept of making the wards of government employees limit their education upto 12th Std. with a view of providing them menial jobs. Therefore government should encourage high level education and pay Children Education Allowance upto Post Graduation level.

CONCLUSION:

Except for the above flaws which need to be rectified, the recommendations of the VII CPC are by and large beneficial and therefore there should be no cause for resentment among the central government employees. They should rejoice over the benefits offered by the VII CPC since the recommendations of the VII Pay Commision are going to yield huge financial  benefits in the long run. However, there is a need to take up the matter with the government on the issues which really need intervention by the government to set right the anomalies.

In a nutshell the Chairman and Members of the VII CPC have done a commendable job and fulfilled their mission successfully ensuring justice to all levels of central government employees without any need for worrying about their bread and butter. They really deserve appreciation for presenting an employee friendly report which surely is far beneficial in the history of pay commissions constituted so far.

M.DORAI
Deputy Director
ESIC MODEL HOSPITAL
(Ministry of Labour, Govt. of India)
Rajajinagar,Bangalore-560010- is the Author of this article

M.DORAI | doraiesic@gmail.com

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