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Understanding 7th Pay Commission Pay Matrix

Last Update Date : April 29, 2019
Estimated Read Time: 8 min

pay commission

When the recommendations of the 7th Pay Commission will be implemented in 2018, pensioners will be the biggest beneficiaries. Where the pay scale under the 7th Pay Commission for the serving employers will increase by 16%, pensioners will see a rise of 24% increase in their income. However, allowances will witness the biggest rise by approximately 63%. The pay matrix of the 7th Pay Commission is simple to understand and predictable by being transparent. The government employees that are coming directly under the purview of the 7th Pay Commission have kept forth their demands.

What is a Pay Commission?

A pay commission is an administrative system set up by the government to determine the salaries of the government employees. The Central Government constitutes a pay commission once in every decade to revise the pay structure of the employees. Each pay commission has a ToR, that is the term of reference, apart from revising the salary. These pay commissions also decide payments made to the pensioners.

The ToR of 7th Pay Commission stated that the salaries of the central government employees will be revised on the basis of the rationalisation and simplification of the salary structures and the specialised needs of different departments.

Earlier 6 Pay Commissions

Before knowing about the recommendations and other details of the 7th Pay Commission, let us quickly skim through the earlier six pay commissions.

  • 1st Pay Commission
    Mr Srinivasa Varadacharia chaired the first pay commission in January 1946, and the report was submitted in May 1947. Based on the idea of living wages to the employees, the commission had fixed a minimum wage of Rs 55 (Rs 30 + Rs 25 as DA).
  • 2nd Pay Commission
    Second Pay Commission was set up in August 1957, which was chaired by Mr Jagannath Das and the report was submitted two years later. The pay scales in this commission were revised by merging basic pay with 50% of DA, and it then recommended Rs 80 as minimum remuneration (Rs 70 + Rs 10 as DA).
  • 3rd Pay Commission
    The third pay commission was set up in April 1970, chaired by Mr Raghubir Dayal, and the report submitted in March 1973. The commission recommended Rs 185 per month as minimum remuneration, but some recommendations were modified by the government after taking into consideration the employee’s point of view and raised the minimum wage to Rs 196 per month.
  • 4th Pay Commission
    Fourth pay commission was chaired by Mr P N Singhal which was set up in June 1983, and the report for the same was submitted within a period of 4 years in 3 phases. The commission recommended the government to put in a place a permanent machinery for undertaking periodical review of allowances and pay of employees which was not implemented.
  • 5th Pay Commission
    The fifth pay commission was set up in June 1983 and chaired by Justice S Ratnavel Pandian. The report of this pay commission was submitted in January 1997. It was recommended to reduce the number of pay scales and increase the minimum pay to Rs 2550 from Rs 750.
  • 6th Pay Commission
    Justice B N Srikrishna chaired the sixth pay commission which was set up in July 2006, and the report was submitted in March 2008. Running bands were introduced to remove stagnation. Also, the entry level pay band’s minimum salary was fixed at Rs 7000, and the maximum salary at the secretariat or equivalent level was fixed at Rs 80,000.

Who is covered under the Pay Commission?

All the people working in the civil services of the central government and the people who are paid salaries from the ‘Consolidated Fund of India’ that is, from the account in which the government collects the revenues, are the central government employees as per the 7th Pay Commission.

7th Pay Commission Pay Matrix

Existing Pay BandsExisting Grade Pay LevelsAvailable forNew Pay Levels
2000C, D3
2800C, D5
4200C, D6
4600C, D7
4800C, D8
PB-35400C, D, M10
6600C, D, M11
Cabinet Secretary, Defence Chiefs18

All the demands mentioned above have been included in the 7th Pay Commission pay matrix where the grade pay has been considered, and the levels have been rationalised.

Highlights of 7th Pay Commission

Let us look at the highlights of the 7th pay commission

  1. Recommendation on minimum pay for government employees
    The newly recruited government employee at the entry level will receive an increased minimum pay from Rs 7,000 to Rs 18,000 per month. For a newly recruited Class I officer, the minimum pay has been increased to Rs 56,100 per month.
  2. Recommendation on maximum pay for government employees
    It is also recommended that the maximum pay for government employees is to be increased to Rs 2.25 lakhs per month and Rs 2.5 lakhs per month for apex positions like the Cabinet Secretary and other people working on the same level.
  3. Pay Matrix
    Taking into consideration that the issue lies in the Grade Pay Structure, a new pay matrix has been recommended by the 7th Pay Commission. Therefore, the status of the government employees will be decided by the new Pay Matrix and not by the Grade Pay, after the implementation of 7th Pay Commission.
  4. New Pay Structure
    7th Pay Commission recommended the New Pay Structure which has not introduced any new levels but has included all the existing levels.
  5. WRIIL
    Work related illness and injury leave (WRIIL) to an employee is recommended to be granted with full pay and allowances by the 7th Pay Commission.
  6. Dearness Allowance
    The employees witnessed a 2% hike in the Dearness Allowance which came as a huge relief to them. This decision taken by the Union Cabinet will benefit more than 55 lakh staffers and pensioners and 50 lakh Central Government employees.
  7. Annual Increment
    No changes have been made to the annual increment of 3% per annum because the Pay commission has suggested to retain it.
  8. MSP
    7th Pay Commission has recommended the Military Service Pay (MSP) for the Defence Personnel only. This compensation is paid to people who are offering military services in India.
  9. HRA
    The Pay Commission aims at increasing the basic pay of the government employees, thereby increasing House Rent Allowance by 24%. The Commission also stated that the HRA will be increased to 27%, 18% and 9% while the DA reaches 50%.
  10. Advances
    7th Pay Commission has abolished all the non-interest bearing advances other than the Personal Computer Allowance and House Building Advance. Also, the House Building Advance has been increased to Rs 25 lakhs from Rs 7.5 lakhs.
  11. Medical Changes
    A Health Insurance Scheme has been recommended by the Pay Commission for the Central Government Employees and Pensioners. It has also recommended cashless medical benefit for the pensioners outside the Central Government Healthcare Scheme area.
  12. Modified Assured Career Progression (MACP)
    The 7th Pay Commission aims to improve the quality of services provided by the government and therefore it focuses on individual performance. This is the reason that the performance benchmark of MACP has been made stricter and altered, as per the reports.
  13. Pension
    The Pay Commission has suggested a revision in the current pension scheme and has recommended a revised formulation of pension for civil employees including Defence Personnel and CAPF who have retired before 1st January 2016.
  14. Disability Person for Armed Forces
    The Pay Commission has recommended implementing a slab-based system for the disability pension element instead of the current percentile-based disability element.
  15. Gratuity
    The ceiling of gratuity has been recommended by the commission to be increased to Rs 20 lakh from Rs 10 lakh. They have also recommended that the ceiling of gratuity will be increased by 25% when the Dearness Allowance rises by 50%.

The revision of the 7th Pay Commission is required for the rising cost of living and the pay matrix introduced has been nothing but a blessing in disguise.

Arrears on Salary for Central Government Employees

The arrears on salary are paid to the central government employees after the implementation of the recommendations made in the CPC. The arrears will be calculated from the time the recommendations have been implemented till the time when the employees actually get the revised salary.

Advantages and Disadvantages of 7th Pay Commission

There are certain advantages and disadvantages that the 7th Pay Commission recommendation will have on the market and economy.

Let us check the benefits first

  • After the implementation of the recommendations made by the pay commission, a total of over one crore employees and pensioners of the central government will get around a 23% hike in their salaries and pensions. This will boost the overall demand scenario in the market and economy, thereby being beneficial to the country’s GDP (Gross Domestic Product).
  • The amount of money will ultimately enter the economic cycle and the government will get back almost 20-30% of money back in the form of revenue in taxes
  • The 7th Pay Commission will give a huge relief to the stock market.

Like every coin has two sides, 7th pay commission also has some disadvantages that will impact the market and economy.

  • It has been always said that there might be a risk to the CPI inflation on the back of the 7th Pay Commission.
  • The government’s pocket is most probably to have an additional burden of some few crores which may make it difficult for the government to meet the fiscal deficit target.
  • The economic divide will increase in with a huge population getting hike while the nation is still struggling to overcome poverty, social degradation and insecurities.
  • Pay commission increment often disrupts the government finances and impacts the GDP for a few years.

Updates on 7th Pay Commission

  1. Benefit to Pensioners
    The government has revised pension limits on the recommendation of the 7th Pay Commission, both for teaching as well as non-teaching staff of the state and central universities. The decision is said to benefit the current strength of 25,000 pensioners of the central and deemed universities as well as UGC (University Grants Commission) – maintained universities. An additional 8 lakh teaching and 15 lakh non-teaching staff, who wish to adopt the pay scales or have already adopted them, will benefit from the decision.
  2. Impact on Inflation due to HRA
    As per the report on monetary policy by RBI’s department, the Consumer Price Index (CPI) inflation was impacted by 35 basis points due to the increase in the house rent allowance recommended by the 7th pay commission for central government employees.
  3. Benefit for Railway Employees
    Railway employees can now avail LTC (Leave Travel Concession) for the first time. However, government employees and their spouses who are working in the Indian Railways are not entitled to get LTC as they have the ‘Free Pass’ facility.

7th Pay Commission, like all the previous pay commissions, is good news for central government employees and pensioners and they are waiting eagerly for the implementation of the pay matrix.


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Niteesh Singh
Niteesh is a Tax Researcher and Content Lead at H&R Block (India). He holds an MBA with a specialisation in BFSI domain. In his career spanning over six years, he has helped thousands of people understand taxes in a simple and effective manner. Outside work, Niteesh is an astronomy geek who is also involved in wildlife conservation activities.

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