What is pay commission?

With high inflation nibbling on their purchasing power, year after year, millions of employees across the country have been looking towards the government for some relief. Office chats often veer towards guessing the year when the next pay commission will come -- and when their salaries will see a good jump. Most feel that DAs are not enough to cope with inflation.

A business website, while citing a government source, said that the recommendation of the next pay commission -- which will be the eighth one-- will not be implemented before 2026.

What is pay commission?

Pay commission is a body set up by the Central government that reviews and recommends changes to the salary structure of the employees. This panel also reviews the bonuses, allowances and other benefits of the employees. It recommends changes for central government employees and pensioners as well as the defence forces.
 

So as inflation eats into the purchasing power of money, it is important to adjust salaries of government employees. The pay commission is responsible for salary revisions of all the central government employees and pensioners and its decisions affect millions of people.

While reviewing the salary structure, the pay commission takes into account the prevailing economic conditions, inflation, fiscal position of government among various other factors.

It is not mandatory for the government to accept the recommendations of the pay commission. The government may choose to accept or reject the recommendations.

Pay commissions are usually constituted every 10 years and the first pay commission was set up in 1946. Since Independence, a total of seven pay commissions have been formed. The latest pay commission was set up in 2014 and its recommendations came into effect in 2016. Currently, central government employees and pensioners get the salaries based on recommendations of 7th pay commission.

The 7th pay commission has made some important recommendations which were accepted by the government including introducing a new pay matrix and keeping the annual increment rate at 3%.

So, if the pay commission’s review of salary structure comes after a significant time gap, how do employees get protected from inflation? To compensate for real value erosion of employees' salaries due to inflation, the government periodically reviews Dearness Allowance (DA).

The Dearness Allowance revisions are also based on the previous pay commission and differ from employee to employee.