7th Pay Commission: How Restoration of DA Will Change 7th Pay Commission Matrix?

Central government servants (CGS) are now maybe thinking about how the restoration of Dearness Allowance (DA) for about 52 lakh central government employees will affect their 7th pay commission matrix. Anurag Thakur, the Minister of State Finance and Corporate Affairs., announced this in a written reply to a question in the Rajya Sabha last month. And this is the reason for changes taking place in the 7th CPC pay matrix for central government employees. Since the centre has announced that all three pending DA installments will be restored starting from July 1, 2021, a central government employee's DA will increase from 17 per cent to 28 per cent. This comprises a 3% DA spike starting from January 1, 2020, a 4% DA spike starting from July 1, 2020, and an estimated 4% DA spike starting from January 1, 2021.

7th Pay Commission Fitment Factor

On July 1, the restoration of DA benefits will have a significant effect on the salary of Central Government employees. The increase in the DA will have a direct effect on the DA, HRA, Travel Allowance, and Medical Allowance of central government employees. A central government employee's net CTC is calculated by multiplying their basic salary by the 7th CPC fitment factor including all allowances. Net salary, on the other hand, is the difference between Net CTC and deductibles such as PF contribution, gratuity, and so on. And since, the fitment factor for the 7th pay commission is 2.57. The basic salary of a central government employee is multiplied by 2.57 which results in the CTC of a central government employee without allowances. Consider that a basic monthly salary of a central government employee is Rs 30,000. In that instance, the monthly CTC for that central government employee, except allowance, will be Rs 77,100 (Rs 30,000 x 2.57).

Dearness Allowance (DA), Travel Allowance (TA), House Rent Allowance (TA), medical reimbursement, and other benefits are included in the allowance portion of the CTC. Since DA will increase from 17% to 28% on July 1, 2021, a central government employee will be eligible for 28% DA, which is determined on the basis of his or her basic salary. In the same way, one's Travel Allowance (TA) will increase in relation to the DA. As a result, one's TA will increase. As a result of the increase in DA, a central government employee's allowance will also hike. As a result, the expected increase in DA for a central government employee will result in a significant increase in one's monthly salary. Whereas, the three installments of DA arrears will be the reason for smile for central government employees. Since CGS' PF and gratuity contributions are measured on the basis of basic salary plus DA, a potential DA hike will have an effect on a central government employee's monthly PF and Gratuity contribution.

Since the DA will increase on July 1, 2021, an employee's monthly Pf and gratuity allowance will increase as well. Around 60 lakh retired central government pensioners will also benefit from the restoration of the DA. As a result, if the DA is restored, the DR benefit for retirees will be reinstated as well, and the pension for retired central government employees will begin on July 1, 2021. Since the Dearness Relief (DR) is related to the DA spike, when the DA hike is announced, a pensioner's DR will also be increased automatically. As a result of the DA restoration, a central government employee's 7th CPC pay matrix will change, and the change will be beneficial to them.