D M Deshpande
Pay Commissions are appointed by the government after every 10 years. It is estimated that in the central government alone, there are over 1.2 crore employees and pensioners. Add to this the list of state governments (and their employees and pensioners) that accept the recommendations of pay commissions fully or partially.
The announcement of the formation was made on January 16, this year. Yet, so far neither the chairman nor the members of the commission have been finalized and appointed; the terms of reference too have to be framed for the commission to begin the mammoth exercise.
The terms of reference define the scope and parameters for the Commission and give specific guidelines for review and recommendation of new pay scales. Circular with regard to deputation of thirty five staff positions have been issued but the work cannot begin.
The term of the 7th Pay Commission ends on December 31, and the 8th Commission’s recommendations could be implemented from January 1, 2026. But due to the delays caused till now, the deadline is almost certain to be missed. Past pay commissions-6th and 7th have taken between 2 to 2.5 years before the employees received the benefits of new scales. Actual implementation may not be before 2027; it may even stretch to the year 2028.
Previously the central government implemented new pay scales with retrospective effect from January 1. However, the Government may weigh several factors like the fiscal impact, inflation and the ripple effect on salaries of PSU employees before taking a decision to implement the new scales. Most importantly, the decision will depend on the political will.
Though early days, speculation is rife about possible hike in salaries and pensions of central government employees. In this connection, the fitment factor plays an important role. This is used as a multiplier to fix the basic salary in the new pay scale. The fitment factor is recommended by the Commission. Yet, based on unions’ demands, previous Commissions’ decisions and overall macro economic view, it is widely expected that it will be in the range of 1.83 to 2.46.
It will hike the basic salary at the lowest grade from Rs 18,000 to Rs 51,000. The new pay package will take into account inflation, economic growth and aim at rationalizing compensation across roles and responsibilities in the government. However, the actual increase in salaries is likely to be in the range of 30 to 34%.
This is because the DAis merged with the new basic pay. In the 7th Pay Commission fitment factor used was 2.57 and the hike was a modest 14%, the lowest since 1970. Therefore, expectations are on the higher side from the 8th Commission. Central Pay Commissions are not just committees that recommended wage hikes of the employees, but mirror the socio-economic growth of the economy. Often, they set a model for a fair or an equitable pay for employees services with a hope that the private sector too takes a cue from it. On balance, it can be said that they have influenced the compensation factor across all domains in the country.
It is interesting to see how the various commissions have evolved by changing their main thrust or objective. The first commission was very modest, concentrating on awarding just a living wage. The second and third aimed at cost of living and attempted parity with corresponding pay packages in the private sector.
The fourth Commission was a landmark in that it set a performance linked pay which was debated for a decade. The fifth laid emphasis on simplification and rationalizing of pay scales. The 6th introduced, for the first time, band pay and grade pay. It was a virtual bonanza for employees with a hike of around 40% in wages. The 7th Commission reduced hierarchies in government bureaucracy using a Pay Matrix. It sought a better formula for pension calculation and gave a boost to work life balance discourse.
The 8th Pay Commission stands at a new inflection point. The Indian economy has made rapid economic progress in the last couple of decades. In the comity of nations, India is finding its rightful place not just in terms of the size of its population or the fact that it is the world’s largest democracy but also in ways it has created a niche for itself in defence, space, agriculture, industry and services. All these have added to the air of expectations of the Unions and the employees.
However, there are challenges too on the horizon. Geo-political tensions have escalated with India fighting a near war. Two more wars are ongoing that have caused disruptions, delays and bottlenecks. Relations with China have soured in recent times though there is a faint sign of silver lining going forward. The macro economy is well managed by the government. It will therefore be keen not to upset the apple cart.
As per estimates, the salary and pension hikes may burden the government with an additional Rs 1.3 to Rs.1.8 lakh crore; its direct impact on GDP is estimated to be between 30 to 50 basis points. The centre will also be mindful of the ripple effect of pay increases; states too will be compelled to follow suit sooner or later.
Sudden and high spikes in governments’ spending will have a negative impact on fiscal position unless of course such hikes are also accompanied by simultaneous gains in productivity and efficiency.
While the wait for employees is not over, they are optimistically looking for a promise of better tomorrow!
The author has four decades of experience in higher education teaching and research. He is the former first vice-chancellor of ISBM University, Chhattisgarh
