7th Pay Commission: How salary of central government employees is all set to hike from July 1

Starting July 1, central government employees and pensioners who receive salaries and pensions based on the 7th Pay Commission will be eligible for full Dearness Allowance (DA) benefits. Central employees currently receive a 17 per cent DA. Last year, the Union Cabinet authorised a 4% rise in DA for government employees, bringing the total to 21%. This was supposed to take effect on January 1, 2021. But due to the current COVID-19 issue, the Ministry of Finance agreed to freeze the increase in dearness allowance (DA) for over 50 lakh Central government employees and 61 lakh pensioners until July 2021. Due to the coronavirus epidemic, the three instalments of Dearness Allowance and Dearness Relief due to central government employees and pensioners on 1.1.2020, 1.7.2020, and 1.1.2021 have been delayed.

The outstanding instalments of dearness allowance for the aforementioned employees would be subsumed in the cumulative modified rates from July 1, 2021, according to the Finance Ministry. Employees are given a Dearness Allowance to cushion them from inflation. It occurs twice a year, from January to June and then again from July to December. To determine the DA, the government estimates average inflation in 6 months. The average inflation rate for July-December 2020, as per the AICPI, is now 3.5 percent. As a result, it is expected that the dearness allowance will be a minimum of 4% for the period January to June 2021. When DA is declared, TA rises in sync with it. As a result, the rise in DA is correlated to the rise in TA. In the same way, HRA and medical compensation are determined. After all the allowances have been determined, a central employee's monthly CTC is calculated.

In a memo, the Ministry of Finance stated that "In view of the crisis arising out of COVID-19, it has been decided that additional instalment of dearness allowance payable to Central Government employees and dearness relief (DR) to Central government pensioners due from January 1, 2020, shall not be paid. The additional instalment of DA and DR due from July 1, 2020, and January 1, 2021, shall also not be paid." DA and DR, on the other hand, will continue to be paid at present rates. Aside from receiving the instalments, Central government employees might expect a significant rise in their salary, since DA may be hiked by 11%. The DA is now paid at a rate of 17 per cent. Nevertheless, it would now include a 4% rise between January and June 2020, a 3% rise between July and December 2020, and a 4% rise between January and June 2021. As a result, the final will be 28%. As per the source, the current minimum salary for central employees is Rs 18000, according to the pay matrix. A 15% dearness allowance is expected to be introduced to the current pay matrix.

As a result, under the current pay matrix, Rs 2,700 per month would be added to the salary as DA. As a result, the overall dearness allowance would increase by Rs 32400 on an annual basis. The fitment factor is used by the 7th Pay Commission to determine the salary of central government employees. The fitment factor for central employees is now 2.57. In addition to benefits such as Dearness Allowance (DA), Traveling Allowance (TA), and House Rent Allowance (HRA), the basic salary of central employees is determined by the fitment factor. Allowances such as DA, TA, HRA, and medical compensation are determined after the salary is set. For instance, if an employee's minimum basic salary is Rs 18,000 according to the pay matrix, then his or her salary without allowances will be 18,000 X 2.57 = Rs 46,260. From July 1, 52 lakh central employees and more than 60 lakh pensioners would benefit from an increase in dearness allowance. EPF and gratuity will also rise as a result of this.