In order to revise prize-wages, and allowances, and also to adjust the pension schemes of their central government employees and pensioners, the government of India surrounded this commission; thus, the 7th pay Commission represented an evolution in the compensation package.
Constitution and History of the 7th Pay Commission
The 7th Central Pay Commission was constituted in February 2014 under the chairmanship of Justice A. K. Mathur and submitted the report with its recommendations for the consideration of the government in 2015.
Pay scales for the employees were revised and implemented with effect from January 1, 2016. In the words of Justice A. K. Mathur, the objective of the commission was to rationalize the salary structure to bring in transparency in the grading of pay, and to provide motivation to employees in different departments.
Salary Structure and Fitment Factor
The 7th Pay Commission introduced a new pay matrix to replace the previous grade pay system. Accordingly, the minimum basic pay was raised from ₹7,000 to ₹18,000 per month, while the highest salary for top-level officials was fixed at ₹2.5 lakh per month.
The fitment factor is the most important determining element of the revised pay, fixed at 2.57 times the previous basic salary. This resulted in a huge increase in the cash earnings of employees and consequently increased the standard of living.
Allowances and Pension Reforms
Some of the important changes brought about by the 7th Pay Commission concerned allowances. House Rent Allowance (HRA), Travel Allowance (TA), and Dearness Allowance (DA) were restructured as per market rates. Pensioners had the benefit of having their pensions adjusted under the new formula in accordance with the revised pay matrix; this assured greater financial security for them after retirement.
Effect on Government Employees
In addition to the power grant, the financial position of over 47 lakh central government employees and over 50 lakh pensioners was provided with much-needed relief. This would, in turn, provide a boost to consumer spending, improve the morale of workers, and stabilize the economy with increased purchasing power.
The Looking-Ahead
Since the conversations surrounding the 8th Pay Commission have now gathered flight, the 7th Pay Commission in India continues to be the Indian yardstick for wage revision, shaping employee expectations and government policy toward implementing a wage for fair and sustainable living.