8th Pay Commission: After a long time the central government constituted the 8th pay commission. Millions of government employees across the country are happy with this. But, the question arises why the inflation allowance goes to zero with every new pay commission? Let’s find out the answer to this question and the reason behind it.
What is the purpose of Drought Allowance?
Dearness Allowance is one of the most important components of government employees’ salaries. Employees are given drought allowance to meet the rising cost of living. Every 6 months revisions are made in the inflation allowance based on the Consumer Price Index. This ensures that employees maintain their purchasing power despite market fluctuations.
Role of Pay Commission
Every 10 years the Pay Commission reviews the total salary structure of government employees. This is done to revise the salaries, to make changes according to inflation, to change the government salaries according to the current economic realities. The Pay Commission takes into account market values, cost of living and inflationary conditions to propose a more stable pay scale.
Merger of DA in Basic Pay
Drought allowance of employees is usually an important part before the new pay commission comes into effect. It is sometimes more than 40% of their basic pay. When the new pay structure comes into effect, this inflationary allowance amount is added to the Basic Salary through a fitment factor.
Why does drought allowance go to zero?
When the drought allowance is incorporated into the new basic pay, inflation is already compensated for. Hence the drought allowance will technically reset to 0 percent in the new structure. Revised Basic Pay now shows inflation adjusted figures. Later the drought allowance will be increased again based on the new inflation calculations.
For example, before the Eighth Pay Commission, if an employee’s basic pay was ₹40,000, the inflation allowance was 46 per cent, while the share of inflation allowance was 46 per cent of ₹40,000. That is ₹18400. Now after this implementation the fitment factor is 2.57, the new basic salary is Rs. 40000×2.57 = ₹1,02,800. Now that drought allowance up to that point is over, DA will start again from 0% of the new basic pay.
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