7th Pay Commission News: The government hiked dearness allowance (DA) for over 1 crore employees and pensioners by 4% for the first half of 2024. With this hike, the DA ceiling hit 50% of the basic pay, triggering speculation about the merger of this allowance into the basic salary.
What was behind this DA-basic pay merger speculation?
In 2004, the DA was merged into the basic salary of government employees when the allowance touched 50%-mark after the recommendations of the 5th Pay Commission. However, later 6th and 7th Pay Commissions did not recommend any such measure.
Moreover, government officials, reacting to media reports following the last DA hike announced in March, stated that there would be no automatic merger of DA into basic pay at this point, citing reasons for their decision.
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DA-basic pay merger to happen soon?
Several employee organisations have long been demanding that, after reaching a 50% dearness allowance threshold, it should be merged into the basic pay, as was done previously. Experts also believe that the government may merge the dearness allowance into basic pay starting from July 2024. They argue that the DA currently stands at 50% after the January hike and has not breached the 50% level. However, after the July raise, the DA will exceed 50% of the basic pay level. According to these experts, an announcement regarding the DA-basic pay merger can be made after the new government is formed at the Centre in June 2024. After the DA is merged into the basic pay, employees’ dearness allowance will again start from zero.
The DA for employees and Dearness Relief (DR) for pensioners are calculated based on the All-India Consumer Price Index (AICPI). The government revises DA and DR twice in a year, in January and July, respectively. Recently, the Centre announced a 4% increase in DA and DR, bringing the threshold to 50% of the basic salary of staff.
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Revision in allowances post DA hike in January
After the DA hike for government employees and pensioners to 50% early this year, certain allowances, including children’s education allowance and hostel subsidy automatically got revised by up to 25%.
Issuing a clarification in this regard, the Department of Personnel & Training (DoPT) said the limits of children’s education allowance and hostel subsidy “would be automatically raised by 25% every time the dearness allowance on the revised pay structure goes up by 50%”.
Is the gratuity limit increased to 25 lakh after DA hike?
The Centre’s decision to hike dearness allowance also resulted in a revision in other allowances, including retirement gratuity.
But, in a recent circular, the Employees’ Provident Fund Organisation (EPFO) announced keeping in “abeyance” the hike in retirement and death gratuity for employees.
To recall, the EPFO in an order issued last month said that the maximum limit of retirement gratuity and death gratuity was hiked by 25% from Rs 20 lakh to Rs 25 lakh. This hike in gratuity was announced on account of a revision in dearness allowance payable to central government employees to 50% of the basic pay with effect from January 1, 2024.
A week later on May 7, the retirement fund body issued another circular announcing that the enhancement of gratuity on account of an increase in DA has been kept in abeyance with immediate effect. The order has not mentioned any reasons for the decision.
