.gif)
.webp)
.svg)
Employees are a key driving force for any government organisation and it is important that the remuneration they receive is commensurate with evolving economic conditions. Inflation, parity with private firms, and industry benchmarks are some of the factors that the government takes into account while designing a feasible compensation structure.Imbibing this in letter and spirit, the government of India has constituted the Central Pay Commission, an administrative mechanism to examine, review, and recommend changes in the existing pay structure for all central government employees keeping in view the impact on financial resources of the government. After detailed studies, the commission has recommended the 7 pay matrix that represents a comprehensive pay structure for different levels and pay bands.Let us now understand the 7th pay commission pay matrix in detail.
What is the 7 pay matrix?
The 7 pay matrix, a revised version of the 6th pay matrix, is a two-dimensional table consisting of 18 columns and 40 rows. It presents a snapshot of the complete salary structure by associating columns 1 - 18 with a ‘functional role in the hierarchy’ and rows with different levels within a particular functional hierarchy. Recommended by the Central Pay Commission (CPC), the seventh CPC pay matrix is a novel way of representing the salary structure by rationalising the grade pay, pay bands, and levels. The pay matrix level 7 has been designed in a simplified manner so that central government employees can easily understand their current earnings as well as evaluate potential earnings over the course of their career. The Central Pay Commission recommended the implementation of the 7 pay matrix from 1st January 2016.
Features of the 7 pay matrix:
The pay matrix in 7th pay commission is based on the Aykroyd formula. Each functional hierarchy is titled ‘Grade Pay’ and a group of Grade Pays has been mapped to a ‘Pay Band’. The minimum basic pay has been fixed at ₹18,000 per month while the maximum basic pay has been set to ₹2,50,000 per month that is applicable to Cabinet Secretary and others at the same level. An annual increment of 3% is automatically applied to the pay structure when an employee moves from the previous level to the next within a functional hierarchy. A significant aspect that differentiates the 7 pay matrix from the existing pay scale proposed by the 6th Central Pay Commission is the fitment factor.
Benefits of 7 Pay Matrix
There are numerous benefits of the 7cpc pay matrix some of which are listed below:
- Simplifies the entire pay structure and provides transparency
- Improves efficiency in administration
- Incorporates the grade pay into pay bands making the task of salary computation easier
- Minimises the differential pay across pay bands
- Provides a clear progression path for an employee both in terms of increment and grade promotion
- Provides clear guidelines on pay fixation for existing employees as well as for new recruits
Vertical and horizontal movement:
The 40 rows in the 7 pay matrix reflect the ‘pay progression’ for an employee vertically within a particular functional hierarchy having an estimated government service career of 40 years. On the other hand, when an employee receives a promotion or a non-functional financial upgrade, the pay structure gets shifted to the next grade pay signifying a horizontal movement in the pay matrix in 7th pay commission. So, a vertically downward shift denotes an increment whereas a horizontally rightward shift signifies a promotion or a non-functional financial upgrade for an employee.
Applicability:
The pay matrix in 7th pay commission is applicable for the following group of employees, numbering around more than 30 lakh - central government personnel (industrial and non-industrial), employees under the All India Services, employees of the Union Territories, officers and employees of the Indian Audit and Accounts Department, members of the regulatory bodies (excluding the RBI) formed under the Acts of the Parliament, and officers and personnel of the Supreme Court.
What does the 7 pay matrix table look like?
The 7th cpc pay matrix table shown below is recommended by the Central Pay Commission:
Key terms in the 7 pay matrix:
- Pay Band in 7 Pay Matrix: Pay bands in the 7 pay matrix are a representation of the pay scales as per the pay grades. As an important part of the compensation structuring process, pay bands in the 7 pay matrix are used to assign ranks to different jobs based on location, responsibilities, education, and multiple other factors. The central government has three categories of employees - Group A, Group B, and Group C. This classification for particular job profiles is made by the central government on the basis of pay bands.
- Grade Pay in 7 Pay Matrix: The concept of ‘Grade Pay’ introduced by the 6th Central Pay Commission has been done away with in the pay matrix in 7th pay commission. Grade Pay was used as another level of differentiator in the earlier pay matrix. When applied to the pay matrix in 7th pay commission, the total basic pay for an employee is an addition of the pay in the pay band and the grade pay multiplied by the fitment factor of 2.57.
- Entry Pay in 7 Pay Matrix: Entry Pay is the minimum basic pay for direct recruitment to central government services. As seen from the 7 pay matrix table, the entry pay has been hiked from ₹7,000 to ₹18,000 in the 7 pay matrix.
What is a fitment factor?
The 7cpc pay matrix has been formulated by incorporating the 6th CPC pay bands subsumed into the grade pay and then multiplied by an Index of Rationalization ranging from 2.57 to 2.81. And then, the different numbers in the above tables have been arrived at. Though different factors have been used to compute the salary figures initially, the CPC has proposed utilising a uniform fitment factor of 2.57 for all employees across pay bands that brings in a much-needed uniformity in the 7 pay matrix table and the subsequent calculations.
How to compute the salary for a hypothetical Central Government Employee?
- Example: A central government employee Mr. X has a pay of ₹5,200 in the pay band 5200 - 20200 and a grade pay of ₹1,900. He lives in town Y that has a population of more than 50 lakh and is listed under a ‘Higher TPTA city’. Calculate the Basic Pay, Dearness Allowance (DA) , House Rent Allowance (HRA) , Transport Allowance, and finally the Gross Salary as per the 7 pay matrix recommended by the Central Pay Commission.
- Computation: Basic pay: The basic pay of the employee as per the 7CPC pay matrix will be (₹5,200 + ₹1,900) x 2.57 = ₹18,247. The nearest higher number in the table closest to ₹18,247 is ₹18,500. So, the basic pay of Mr. X would be ₹18,500. Dearness Allowance: The DA for Central Government employees is currently set to 42% of the basic pay. So, the DA will be 42% of ₹18,500 = ₹7,770. House Rent Allowance: The current HRA for a city with a population of 50 lakh and above is 27% of the basic pay. Therefore, HRA = 27% of ₹18,500 = ₹4,995. Transport Allowance: For level 2 basic pay, the transport allowance recommended by the 7th Central Pay Commission is ₹1,350 + DA. So, TA will be ₹1,350 + ₹7,770 = ₹9,120. Gross Salary: The gross salary for Mr. X would be ₹18,500 + ₹7,770 + ₹4,995 + ₹9,120 = ₹40,385.
Also Read: 7th Central Pay Commission - Implementation, Effects and Benefits
Financial implications on the government treasury:
For FY 2016-17, the total financial impact was estimated to be ₹1,02,100 crore under the ‘Business As Usual’ expenditure scenario. The total impact could be further segregated to ₹39,100 crore towards increase in pay, ₹29,300 crore for increase in allowances, and the remaining amount of ₹33,700 crore for increase in pension.Out of the total financial outgo, ₹73,650 crore was borne by the general budget and the rest ₹28,450 crore was borne by the railway budget.
Conclusion:
The pay matrix in 7th pay commission offers a great deal of simplicity to the otherwise difficult-to-comprehend salary structure of the central government. The 7 pay matrix is a result of representations from several sections of employees, committee deliberations, and actual studies. If you are a central government employee and the calculations are a bit overwhelming for you, you may contact your department’s human resources team for further clarification.Ready to make the most of your money? Start your tax planning journey now!
FAQS - FREQUENTLY ASKED QUESTIONS
Who decides the pay structure for Central Government Employees ?
The pay commission duly formed by the government of India recommends the pay structure after taking into consideration the demands of employees, market conditions, and the impact on government finances. It is important to note that the pay commission does not decide but uses the word ‘recommend’ in its report. However, the recommendations of the 7th CPC are followed by all central government departments and ministries.
Will the 7 pay matrix be revised in the future ?
The government of India has constituted several pay commissions to bring salary parity of central government employees with the changing economic circumstances. So, it is likely that the pay commissions setup by the government in the future will recommend further changes in the 7cpc pay matrix.
How do I know more about the 7 pay matrix in a more comprehensive manner ?
The entire report of the 7th Central Pay Commission can be downloaded by clicking the link: https://doe.gov.in/files/cenetral-pay_document/7cpc_report_eng.pdf. The report contains in-depth information on the methodology followed that might be of interest to someone.
I am an existing central government employee, how do I find my revised basic pay in the 7 pay matrix ?
An employee needs to add his pay in the pay band and grade pay. After this, the resultant of the addition is to be multiplied by 2.57 which gives the revised basic pay.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
