ASEMINAR REPORT

ON

“6 TH PAY COMMISSION ”

IN PARTIAL FULFILLMENT OF THE DEGREE OF

MASTERS OF BUSINESS ADMINISTRATION (M.B.A.)

FORSUBJECT: COMPENSATION MANAGEMENT

THROUGHTHE DIRECTOR

2009-2010

CENTRAL PAY COMMISSION

A Pay Commission is a panel of members of the Union Cabinet of India

for raising the salaries of government employees.

HISTORY

Pay Commissions are periodically constituted to examine various issues

such as pay and allowances, retirement benefits, conditions of service,

promotion policies, etc. of the Central Government employees. There is

no stipulation regarding any specific time period for constitution of a Pay

Commission for Central Government employees. Since India's

Independence, six pay commissions have been set up on a regular basis to

review and make recommendations on the work and pay structure of all

civil and military divisions of the Government of India.

Till now six Central Pay Commissions have been constituted whose

details are as below:-

First Pay Commission

The first pay commission was constituted in May 1946, and had

submitted its report in a year. and the importance is on the report

chairman was srinivasa Varadachariar.

Date of Appointed : May, 1946

Date of Submission of Report : May,1947

Financial Impact (Rs. in Cr.) : NA

Second Pay Commission

The second panel had been set up in August 1957 and had given its report

exactly after two years, with a financial impact was Rs.396 million

chairman of second pay:jaganath das

Date of Appointed : August, 1957

Date of Submission of Report : August 1959

Financial Impact (Rs. in Cr.) : 39.62

Third Pay Commission

The third pay commission set up in April 1970 gave its report in March

1973, and created proposals that cost the government Rs.1.44 billion.

chairman was raghubir dayal.

Date of Appointed : April, 1970

Date of Submission of Report : March, 1973

Financial Impact (Rs. in Cr.) : 144.60

Fourth Pay Commission

Constituted in June 1983, its report was given in three phases within four

years and the financial burden to the government was Rs.12.82

billion.The chairman of fourth pay commission was P N singhal.

Date of Appointed : June, 1983

Date of Submission of Report : 3 Reports submitted in June, 1986;

Dec. 1986 and May, 1987

Financial Impact (Rs. in Cr.) : 1282

Fifth Pay Commission

The Fifth Pay Commission was set up in 1994 at a cost of Rs. 17,000

crore. The chairman of fifth pay commission was Justice S. Ratnavel

Pandian.

Date of Appointed : April, 1994

Date of Submission of Report : January, 1997

Financial Impact (Rs. in Cr.) : 17,000

SIXTH CENTRAL PAY COMMISSION

In July 2006, the Cabinet approved setting up of the sixth pay

commission. This commission has been setup under Justice

B.N.Srikrishna with a timeframe of 18 months. The cost of hikes in

salaries is anticipated to be about Rs. 20,000 crore for a total of 5.5

million government employees as per media speculation on the 6th Pay

Commission, the report of which is expected to be handed over in late

March/early April 2008. The employees had threatened to go on a

nationwide strike if the government failed to hike their salaries. Reasons

for the demand of hikes include rising inflation and rising pay in the

private sector due to the forces of Globalization. The Class 1 officers in

India are grossly underpaid with an IAS officer with 25 years of work

experience earning just Rs.55,000 as his take home pay. Pay arrears are

due from January 2006 till September 2008. Almost all the Government

employees received 40% of the pay arrears in the year 2008 and balance

60% arrears (as promised by Government) has also been credited in

Government employees account in the year 2009. The Sixth Pay

Commission mainly focused on removing ambiguity in respect of various

pay scales and mainly focused on reducing number of pay scales and

bring the idea of pay bands. It recommended for removal of Groupd-D

cadre.

WHAT IS 6 TH PAY COMMISSION?

A pay commission is a panel set by the union cabinet to examine various

aspects of the compensation package for central government employees.

So, far six central pay commissions have been set up at intervals of 10 to

13 years.

Years of constitution of 6th pay commission are-

First -1946

Second-1957

Third -1970

Fourth -1983

Fifth -1994

Sixth -2006

Pay commissions have examined various issues such as pay and

allowance, retirement benefits, conditions of service; promotion polices

and submitted recommendation on these to the government.

BACKGROUND:

The 6th Central Pay Commission was set up on 5th October, 2006, i.e.,

approximately 13 years after the 5th CPC was set up. The

recommendations of the last three Pay Commissions to set up a

Permanent Wage Body with Constitutional Status and authority were not

found acceptable by the government. The 5th CPC, therefore, as an

alternative, had recommended for decennial revision of Wages in a time-

bound manner.

WHAT ARE THE FACTORS PAY COMMISSIONS LOOK AT IN FIXING SALARIES?

Many factors are considered before determining salaries of government

employees. Certainly the status of the economy is an important

consideration. If there is an economic slow down, chances of big pay

hikes are slim. When the economy is booming government employees

also get to share the general prosperity.

EMPLOYMENT UNDER CENTRAL GOVERNMENT

As on 1st March 1995, the number of civilian employees in Central Govt.

was 38.92 lakhs against the sanctioned strength of 42.18 lakhs of which

41% was in Railways, 13% in Defence, 18% in the Postal and

Telecommunications, 14% in the Ministry of Home affairs (mostly

comprising of Para-military Forces) and the rest 14% in other Ministries

and the Indian Audit and Accounts Department.

Table-2.2

A. DepartmentsIndustrial/Productive Operative posts

1996 2005 Percentagedecrease in 2005 over 1996

Remarks

(in lakhs)

Railways

Defence

Posts/Telecom

S/S 17.1W/S 15.9

S/S 5.9W/S 5.1

S/S 7.5W/S 7.2

16.0 14.3

4.7 3.5

2.3 1.9

6.410.6

20.331.4

69.373.6

Decreases

Total Industrial/ Operative Staff.

S/ S 30.5W/S 28.2

23.0 19.7

24.6 43.1

B. Home Affairs-PolicePara-Military Forces

S/S 5.7 W/S 5.4

7.5 6.0

31.6 25.9 Increase

C. OTHER DEPTTS. ADMINISTRATIVE

S/S 6.0W/S 5.4

5.1 4.4

15.0 18.5

Decrease

D. Grand TotalS/S 42.2W/S 38.9

35.6 30.9

15.6 20.6 Decrease

S/S : Sanctioned strength: W/S : working strength.

MANPOWER REDUCTION & RESULTED VACANCIES IN CENTRAL GOVT.:

The reflection of various downsizing measures undertaken by the

government group-wise during the period between 1999-00 to 2004-05.

There had been no reduction in the sanctioned strength of Group A posts

at all. Where as the Group-B & C, the reduction had been of the order of

13% and in the case of Group-D at 20% and in the unclassified category

as high as 40%.

STATE OF THE ECONOMY AND FINANCIAL RESOURCES

OF THE GOVERNMENT :

The Indian economy, after growing at 8.5 per cent and 7.5 per cent in the

2003 & 2004, it was projected to grow at 8.1 per cent in the current year

2005-06.The following economic scenario was projected in the economic

review 2005-06 presented to Parliament in Feb. 2006:

Foreign currency assets were increased from 51049 Million US $

in 2001-02 to 135571 Million US $ in 2004-05.

Exports have increased by a whopping 84% in dollar terms

between 2001-02 to 2004-05(43827 Billion $ to 80540 Billion $).

Imports also got increased from 51413 B.$ to 109173 B$ during

the Said period by 112%.

GDP at factor cost (at constant prices) in 2000-01 was at 1978055

(Year in 2001-02 stood at 2393671 crores in 2004-05.

The industrial production rose from 167.0 in 2001-02 to 204.8 in

2004-05

The revenue receipts which was Rs.110.130 crores in 1995-96

became Rs.351,200 Cr. in 2005-06 registering an increase of 219%

The direct taxes GDP ratio increased from 2.8% in 1995-96 to

5.0% in 2005-06 inspite of the fact that there had been a net decline

in indirect taxes for the same period.

There is no denying the fact that the social welfare activities for the

downtrodden people of the country should take a front seat so far as the

Govt.`s priorities are concerned, but the Govt. employees should not be

chosen exclusively to bear the brunt.

From the table appended below it could be seen that the revenue

receipts of the Govt. had been progressively increasing over the

year, whereas the percentage of wages and salaries both with

reference to rev.-receipts and rev. expenditure had been declining.

Table IV.1

REVENUE BUDGET WAGES BILL AS % OF

Years Total Rev.Receipts

Total Rev.Expenditure

Wages &Salary Bill

AmountValue

Wage Bill as % of

RevenueReceipt

Wage Bill as % of RevenueExpenditure

1991-92 66,047 82,308 10,744 16.3 13.11992-93 74,128 92,702 13,397 18.1 14.51993-94 75,453 108169 14585 19.3 13.51994-95 91,083 122112 15721 17.3 12.91995-96 110130 139860 18023 16.4 12.91996-97 126279 158988 20396 15.6 12.81997-98 133901 180350 27430 20.5 15.21998-99 149510 217419 31560 21.1 14.51999-00 181513 249109 33978 18.7 13.62000-01 192624 277858 33986 17.6 12.22001-02 201449 301611 31407 15.6 10.42002-03 231748 339627 33317 14.4 9.82003-04 263878 362140 34554 13.1 9.52004-05 306013 384351 38653 12.6 10.1

2005-06RE 348474 440295 40047 11.5 9.12006-07RE 403465 488192 41774 10.4 8.5

Some suggestions given to augment the resources of the Govt.

rather than resorting to the easy option depressing the wages of the

workers and depriving them of a reasonable standard of living:

a) to raise the number of direct tax payers

b) to ensure that at least 3% of the population pays wealth tax

c) to impose increased taxes on luxurious items

d) to structure Corporate Tax on Gross Profit instead of Income

e) to curtail the plethora of expenses/deductions/in this

Corporate tax-system

f) Curbing ostentatious public expenses.

AFTER ALL THIS DETAIL STUDY IT IS CONCLUDED AS:-

The Govt.`s resources as of date do permit to raise the minimum wage of

the Central Government employees to Rs.10,000 on par with the Public

Sector Undertaking, as it will not result in crossing the desirable spending

threshold limit of 25% of the resources needed to deliver quality public

services.

GENERAL METHOD OF FIXING SALARIES.

To fix salaries, a pay commission first determines the two cardinal points

of the salary structure of central government employees. Once the

minimum and maximum salary is fixed, it becomes easier to deduce (to

reach a conclusion by thinking about the information which is available)

other salary brackets.

MINIMUM WAGE AND PAY STRUCTURE

The two important methodologies that could be adopted for the

determination of the minimum wage in the case of Govt. employees are:

a) Fair comparison of the rates obtaining in the Public Sector

undertaking in respect of an unskilled worker.

b) Adopting the 15th Indian Labor Conference norms.

And formulated a combination of the following approaches in the

determination of the minimum wage;

i. Need based approach

ii. Capacity to pay approach

iii. Relative parity approach

iv. Job evaluation approach

v. Productivity approach

vi. Living wage approach

FIXATION OF MINIMUM WAGE AS PER THE NORMS OF 15 ILC NORMS

Items Per day PCU(In grams)

Per month 3CU(In kg)

Price per kg.(In Rs)

Total cost(In Rs)

Rice/wheat 475 42.75 22.00 941

Dal(Toor/Urid/moong)

80 7.2 65.00 468

Raw Veg 100 9.00 28.00 252Greenleaf Veg 125 11.25 24.00 370Other Veg 75 6.75 26.00 176Fruits 120 10.80 50.00 540Milk 200 Ml 18 Ltr 24.00 432Sugar and Jageery 56 5.00 24.00 120Edible Oil 40 3.6 90.00 324Fish 2.5 180.00 450Meat 5.00 180.00 900Egg 90 (no) 2.50 225Detergents,Cosmetics,ect 300 P/m 300Clothing 5.5 Mtr 80/Mtr 440Total 5838Misc @ 20%* 1167.60Total 7005.60Addl. Exp @ 25%** 1751.40total 8757.00Housing @ 10%*** 973.00Grand Total 9730.00

Notes PCU = Per day Consumption Unit*20% Miscellaneous charges towards fuel, electricity, water etc.**Additional Expense at the rate of 25% includes Expenditure towards education, marriage etc. of children, medical treatment, housing, recreation, festivals etc. as per the Supreme Court Decision in 1991.***Housing at the rate of 1/10 of total salary as per Rule 2A of the Income tax Rules read with section 10(13A) of the I.T. Act.

TOTAL EMOLUMENTS (PAY + DA) IN RESPECT OF SOME SELECTED POSTS AS ON 01.01.2006 :

Sl.No.

Designation At Minimum At Maximumof the Pay Scale

1 Peon 4743 59522 Postmen/Police Constable/Lower

Division Clerk5673 8537

3 Upper Division Clerk 7440 111604 Junior Research/Statistical Asstt. 9300 148805 Asstt. of Central Secretariat Sr.

Auditor/Accountant10230 16740

6 Asst. Accounts OfficerResearch Asstt. …………..Section Officer (Central Sectt.)

12090 19530

7 Asstt. Director/Research Officer 14880 251108 Under Secretary/Sr. Research

Officer18600 28272

9 Dy. Secretary/Jt. Director 22320 3069010 Director 26598 3403811 Jt. Secretary 34224 4166412 Addl. Secretary 41,664 4557013 Secretary 4836014 Cabinet Secretary 55800

PROPOSED PAY STRUCTURE

P.S.No.

Pay =4th CPC 5th CPCScale

5th CPCmodified

Proposed for 6th CPC

Rounded Incrmt.5%

S.1 750 2550 2550 10000.00 10000 500S.2 775 2610 2635 10329.00 10500 525S.4 825 2750 2850 10995.00 11000 550S.5 950 3050 3230 12661.00 13000 650S.6 975 3200 3315 12995.00 13500 675S.7 1200 4000 4500 17640.00 18000 900S.8 1350 4500 5063 19847.00 20000 1000S.9 1500 5000 5625 22050.00 23000 1150S.10 1640 5500 6150 24108.00 25000 1250S.11 2000 6500 7500 29400.00 30000 1500S.13 2375 7450 8906 34911.00 35000 1750S.14 2500 7500 9375 36750.00 37000 1850S.32 8000 26000 30000 117600.00 120000S.33 9000 30000 33750 132500.00 135000

Ratio of Minimum and Maximum Salary shall be 1:13.5Note:

1. There will be a slight modification in the pay scales of skilled workers.2. Scale No. S-3 with a minimum of Rs.800 exists in some departments.

They will have to be given the replacement scale of S-4, the minimum of which is Rs.825/-.

3. For certain reasons, the pay scales of some categories in Gr. C and Gr. B had been higher than the entry scale of pay in Group A. The said status was disturbed by the 5th CPC. To set right and bring back the status quo amte. The concerned organizations will take up the issue before the Pay Commission.

4. The Fast track committee in certain organizations, in order to remove the anomaly has to resort to creation of intermediary scale of pay. Since that being outside the recognized scales of pay, such pay scales should be assigned the replacement scale of the higher scale of pay.

■LIST OF ALLOWANCES CALCULATED :

Part A:

1.Dearness Allowance

2. House Rent Allowance

3. City Compensatory Allowance

Part B:

Compensatory allowances:

1.Special Compensatory allowance:E.g. Hill Stations

2. Project Allowances.

3. Training allowance

4.Risk Allowance.

5. Night Duty Allowance

6.Travelling Allowance (TA)

7.Transport Allowance.

8.Leave Travel Concession.

9.Special Pay

10.Deputation (Duty Allowance)

11.Scheme for Educational Assistance

12.Conveyance allowance.

13.Overtime allowance.

14.Income-tax on salaries and Pension.

Miscellaneous:

1.Housing facilities

2.Medcial facilities for the employees.

3.Fixation of Pay on Promotion

4.Fixation of Pay in the Revised Scales

5.Date of effect.

EXTRANEOUS MATTERS

Recommendations are made on the following issues:

I. Optimizing the size of Govt. machinery.

ii. Human resource development.

iii. Modifying the role of the Government in the era of

globalization etc.

PENSION ENTITLEMENT

A.Emoluments for Pensions :

a) basic pay

b) any special pay or personal pay, deputation duty allowance

c) dearness allowance

d) Non-practicing allowances in respect of Doctors

e) 75% of the running allowed in respect of railway staff retired

f) after 4.12.88.

B.Average emoluments

C.Qualifying service for full pension

D.Rate of Pension

E.Pension entitlement

F.Minimum Pension :

Date effective from Minimum pension1.1.1964 Rs.25=001.3.70 Rs.40=001.3.80 Rs.60=001.4.82 Rs.150=00

(inclusive of relief)1.4.83 Rs.160=00 -do-1.1.86 Rs.375=00

G. Dearness Compensation

H. Family Pension

RETIREMENT BENEFITS: GRATUITY AND COMMUTATION OF PENSION

A. Gratuity

B. Medicare

PAY BONANZA FOR CENTRAL STAFF

Sixth pay commission has recommended an average salary hike of 40%

and doubling most allowance, which effective Jan 1, o6.the sop will cost

the ex-chequer Rs 12,561 cores in 2008-09.

By this decision, the cabinet secretary will be the biggest

beneficiary, with a fixed revised salary of Rs90, 000 per month, followed

by the secretary Rs 80,000.the minimum entry-level monthly salary will

be Rs 6,660.

Sixth pay commission have a special attention to defense personal. A

scheme of performance related incentive has been recommended. PRIS

should work as a substitute for bonus, honorarium and overtime

allowances which help to equalize the defense personnel with civilian

staff.

Women and disabled employees have been given special treatment

through a recommendation for improved leave and working conditions. It

through the way for awarding performance through a higher 3.5 %

increment against the normal 2.5 %.

The existing house rent, allowance rate has been retained for A 1

cities, while it is higher by 20% for a B-1 and B-2 cities, while it is higher

by 20% for A, B-1 and B-2 cities. The allowance is higher by 10% for C

and unclassified cities.

SIXTH PAY COMMISSION HIGHLIGHTS:

Maximum Basic Salary - Rs. 90,000 (Cabinet Secretary)

Performance Related Incentive Scheme (PRIS)

Liberal severance package for employees leaving service between

15 to 20 years.

City Compensatory Allowance to be withdrawn.

40% increase recommended in pension/family pension.

5 days a week to continue.

Minimum basic Salary - Rs. 7000

New allowances to be effective from 1st September 2008

IRS officers demand to be considered a superior service to IAS and

IPS rejected

Education Allowances for employees for upto two children - Rs.

1,000 (Earlier, it was Rs. 100)

National Holidays - 3

Gazette Holidays to be canceled

Pay hike will be implemented from January 01, 2006

Maternity Leave : 6 Months

HRA in A-1 Cities - 30%  (Unchanged)

HRA in A, B, B-1 Cities - 20%

Incentive Schemes to be announced

New Medical Insurance Scheme to be launched for government

employees

Market-driven pay for scientists and all other jobs that require

professional skill set.

Total number of salary grades to be reduced from 35 to 20.

The wage hike would increase the financial implication for the

Centre by Rs 17,798 crore annually and the arrears with effect

from January 2006 would cost Rs 29,373 crore, Information and

Broadcasting Minister P R Dasmunsi told reporters after the

Cabinet meeting.

The government increased the minimum entry level salary of a

government employee to Rs 7,000 against Rs 6,660 recommended

by the Commission headed by Justice B N Srikrishna who

submitted the report in March this year.

Consequently, it would push up the total emoluments of an

employee at the lowest level beyond Rs 10,000 per month

including allowances.

It also increased the rate of annual increment from 2.5 per cent to 3

per cent.

In the defense sector, it approved at least three assured promotions

for all defense forces personnel and civilian employees under the

modified Assured Career Progression scheme.

While civilians would get this after 10, 20 and 30 years of service,

defence forces jawans would be promoted under ACP after 8, 16

and 24 years.

The hiked salary would be given to the employees beginning

September this year and the arrears from January 2006 would be

given in cash in two installments - 40 per cent this fiscal and 60 per

cent in 2009-10.

The financial implication of Pay Commission on the General

Budget would be Rs 15,717 crore and Rs 6414 crore on Railway

Budget in 2008-09.

The government’s present salary bill is over Rs 70,000 crore and

the pension bill is over Rs 30,000 crore.

Finance Minister P Chidambaram said the budget deficit target

would be adhered to, despite the implementation of the Pay

Commission recommendations.

The government for the first time approved Military Service Pay

for armed forces personnel, under which officers would get Rs

6,000 over and above their pay per month.

The lowest limit of disability pension for defence personnel would

be doubled to Rs 3100 a month.

No Cabinet Secretary rank for Intelligence Bureau chief, the three

Service chiefs or the Chairman, Railway Board

Group D personnel to stay (peons in ministries and porters in

Railways)

Military service pay for persons below the officer rank (POBR)

would be Rs 2,000 per month

DIG-scale abolished in IPS and Indian Forest Service

The salaries of Brigadiers will be in Pay Band 4 (Rs 39,200-

67,000) as against the suggested pay band 3 (Rs 15,600 - 39,100)

previously.

CHALLENGES OF MAKING 6 TH PAY COMMISSION

The challenges it faces seem staggering, after the 6th central pay

commission races to complete its report. It is expected to act as an

arbitrator in the collective bargaining process between labour and the

largest employer in the country, the central govt...It operates in the

shadow of the budgetary crises brought about by the implementation of

5th pay commission report especially for the state governments, and most

is judicious in representing the interests of government workers against

the rest of the work force. By this the key government posts attract

qualified candidates given the increasing competition from the private

sector.

ARE GOVERNMENT WORKERS POORLY PAID COMPARED TO THEIR BROTHREN IN PRIVATE SECTOR?

Indian Human Development survey of 2005 of 41550

households, conducted by researchers from the University of Maryland

and the National Council of Applied Economic Research and funded by

the US National Institute of Health suggests that this is not the case.

While it has been known that, in general, wages and salaries in the private

sector are lower, much of the discussion focuses on lower skilled workers

in unrecognized private sector employment.

Comparing salaried workers in government jobs and private

jobs, survey report suggest that workers with non-permanent jobs in

private sector earn on an average Rs 2385 and that with permanent jobs in

private sector earn Rs 4620 per month compare to the monthly salary of

Rs6975 for workers in central and state government .these figures include

house allowance and value of meals.

The advantage of government service comes from better salaries for

class C and D workers than comparable pvt.sector jobs .peons, drivers,

sanitary workers, technicians etc are the class C and D workers, they earn

vary little in the private sector, even when they are employed by large

firms. the class C and D workers belongs the majority of government

employees are considerably better paid than private sector workers.

There observation does not dispute the existence of

dizzying private sector salaries for highly qualified IIT, IIM and other

such graduates. But if this is the competition we are concerned with, then

the focus needs to be on specific jobs which requires special skills and

qualifications, instead of taking about private sector competition sector in

general for all government posts.

With increasing competition from the private sector, has it become

difficult to attract highly qualified individuals to government service?

To answer the above there is a good example; In the United States,

treasury secretary Paulson was paid $35 million in his last year as

Goldman Sachems CEO which he resigned to accept a $ 185,000 per

annum salary of the government salary.

CONTROVERSY

Several government services, most notably the armed forces have

complained bitterly of downgradation due to pay commissions exceeding

their brief, and introducing anomalies in the relative scales of pay of

government services. At present, the armed forces have represented to the

government for the removal of anomalies which it is felt that the civil

servants on the commission have deliberately introduced to upgrade

themselves vis-a-vis service officers in the defence forces.

IMPACT OF 6 TH CENTRAL PAY COMMISSION

IMPACT ON CENTRAL GOVERNMENT:

The impact of the impending Sixth Pay Commission recommendations is

expected to be within 0.4 per cent of Gross Domestic Product (GDP),

Given that the Budget has projected GDP at Rs 53,03,770 crore in 2008-

09, the impact of the award may well be Rs 21,215 crore.

IMPACT ON STATE GOVERNMENTS:

The impact of the Fifth Pay Commission was so brutal that some 13

states did not have money to pay salaries in 2000.

So peeved were some state governments that last year states like West

Bengal,Bihar, Orissa, Assam, Manipur, Meghalaya and Mizoram sought

a mechanism under which the Centre could not announce a pay revision

without consulting the states.

They also sought the Centre's help in offsetting the impact.

The agency considers that the Indian states have enough resilience to

absorb the impact of the proposed salary revision, although it also

believes that the financial flexibility of the fiscally weaker states would

be negatively affected, leaving them vulnerable and exposed to pressure

on their budgets. It is likely that the states will be forced to consider

budgetary measures that either increase revenue and/or reduce costs to

maintain overall fiscal balance, in order to ensure that the financial

performance of the last five years or so is not dissipated through reckless

fiscal profligacy.

The overall rise in SPC is 40% over the wage levels set by the FPC;

however, factoring in the cost of living allowance rise given in 2004, the

effective increase is about 28%. Although the Central Pay Commission

recommendations apply to central/federal government employees, it is an

established practice for most state governments to adopt these

recommendations when revising the salaries of their employees. After the

approval of the SPC recommendations, five states have announced that

they will follow the SPC recommendations for their employees, one state

has formed a state-level committee to look into salary revision for its

staff, and another state will implement the salary revision based on

recommendations of this state-level committee.

The state governments' wage bill went up by 74 per cent to Rs 89,813

crore (Rs 898.13 billion) in 1999 from Rs 51,548 crore (Rs 515.48

billion) in 1997.

Economists say that almost 90 per cent of a state's revenues go into

paying salaries.

Now there is an argue that the Sixth Pay Commission will not adversely

affect the states as they are sitting on cash surpluses. Finance Minister P

Chidambaram's Budget 2008-09 had hinted that the financial impact of

the Sixth Pay Commission would be about 0.4 per cent of Gross

Domestic Product, similar to the Fifth Pay Commission award of 1996.

Given that the Budget 2008-09 has projected GDP at Rs 5,303,770 crore

(Rs 53,037.70 billion) in 2008-09, the impact of the award may well be

Rs 21,215 crore (Rs 212.15 billion).

PPTs

CENTRAL PAY COMMISSIONThe Pay Commission is an administrative system/mechanism that the government of India set up in 1956 to determine the salaries of government employees. Pay Commissions are periodically constituted to examine various issues such as pay and allowances, retirement benefits, conditions of service, promotion policies, etc. of the Central Government employees. Years of constitution of 6th pay commission are-First -1946Second-1957Third -1970Fourth -1983Fifth -1994Sixth -2006Fifth Pay Commission The government only implemented the monetary benefits part. Recommendations included slashing the government workforce by 30 per cent; abolishing 350,000 vacant posts and reducing the number of pay scales from 51 to 34, were not implemented. SIXTH CENTRAL PAY COMMISSIONThe Union Cabinet, under the stewardship of Prime Minister Manmohan Singh approved the setting up of the 6th Pay Commission to revise the payscales of central government employees in July 2006. The 6th Pay Commission is headed by its Chairman Justice B N Srikrishna, and has Ravindra Dholakia, J S Mathur and Sushama Nath as its other members. The Pay Commission was supposed to submit its report in 18 months. The 6th Central Pay Commission was set up on 5th October, 2006 And Arrears paid from 01-01-2006 to 31-08-2008.Application started for central Govt.employes from 01-01-2009.And for Maharashtra Govt.employees from 01-07-2009.Why 6th Pay Commission?Decrease in the number of Sanctioned strength & working strength of employees.MANPOWER REDUCTION & RESULTED VACANCIES IN CENTRAL GOVT. The Indian economy, after growing at 8.5 per cent and 7.5 per cent in the 2003 & 2004, it was projected to grow at 8.1 per cent in the current year 2005-06 MINIMUM WAGE AND PAY STRUCTUREThe two important methodologies that adopted for the determination of the minimum wage in the case of Govt. employees are:Fair comparison of the rates obtaining in the Public Sector Adopting the 15th Indian Labor Conference norms.LIST OF ALLOWANCES CALCULATEDPart A:1.Dearness Allowance2. House Rent Allowance3. City Compensatory AllowancePart B:Compensatory allowances:1.Special Compensatory allowance: E.g. Hill Stations2. Project Allowances.3. Training allowance4.Risk Allowance.5. Night Duty Allowance

6.Travelling Allowance (TA)7.Transport Allowance.8.Leave Travel Concession.9.Special Pay10.Deputation (Duty Allowance)11.Scheme for Educational Assistance12.Conveyance allowance.13.Overtime allowance.14.Income-tax on salaries and Pension.Miscellaneous:1.Housing facilities2.Medcial facilities for the employees.3.Fixation of Pay on Promotion4.Fixation of Pay in the Revised Scales5.Date of effect.Gratuity Medicare PensionSIXTH PAY COMMISSION HIGHLIGHTS Maximum Basic Salary - Rs. 90,000 (Cabinet Secretary) Performance Related Incentive Scheme (PRIS)City Compensatory Allowance to be withdrawn.40% increase recommended in pension/family pension.5 days a week to continue. Minimum basic Salary - Rs. 7000 New allowances to be effective from 1st September 2008 IMPACT ON CENTRAL GOVERNMENT The impact of the impending Sixth Pay Commission recommendations is expected to be within 0.4 per cent of Gross Domestic Product (GDP),Given that the Budget has projected GDP at Rs 53,03,770 crore in 2008-09, the impact of the award may well be Rs 21,215 crore.The government’s present salary bill is over Rs 70,000 crore and the pension bill is over Rs 30,000 crore. IMPACT ON STATE GOVERNMENTS The impact of the Fifth Pay Commission was so brutal that 13 states did not have money to pay salaries in 2000. The state governments' wage bill went up by 74 per cent to Rs 89,813 crore (Rs 898.13 billion) in 1999 from Rs 51,548 crore (Rs 515.48 billion) in 1997. Almost 90 per cent of a state's revenues go into paying salaries.