The Union Government periodically constitutes the Central Pay Commissions (CPCs) to look into various issues of payments' structure, retiremant benefits and other service conditions of central government employees and to recommend on the necessary changes. The Union Cabinet approved the Terms of Reference of Seventh Pay Commission on 28th February 2014.
The following are the functions set for the Seventh Central Pay Commission:
1. It is to examine, review, evolve and recommend desirable and feasible changes regarding the principles governing the emolument structure comprising pay, allowances and other benefits, in cash or kind, having regard to simplification and rationalization there in as well as the specialized needs of various departments, agencies and services of the employees of the following categories and departments:
- Central government, industrial and non-industrial
- All India services
- The union territories
- The Indian audit and the accounts department
- Regulatory b0dies (excludes the RBI) set-up under Acts of Parliament
- The Supreme Court
2. It is to examine, review, evolve and recommend desirable and feasible changes regarding principles governing the remuneration structure, concessions and benefits, in currency or kind, as well as retirement benefits of the defence personnel, having regard to historical and traditional parties, emphasizing on aspects unique to these personnel.
3. It is to redesign the emolument structure to attract the most suitable talent to government service; encourage efficiency, accountability and responsibility in the work culture and further excellence in the public governance system to tackle complex challenges of modern administration and speedy social, political, economic and technological changes, with due regard to prospects of shareholders, and to recommend suitable training and capability building through a competency-based framework.
4. It is to examine the prevalent schemes of payment of bonus, keeping in view its impact upon performance and productivity and to recommend on the financial parameters, general principles and conditions for an appropriate incentive scheme to reward excellence in performance, productivity and integrity.
5. It is to review various prevalent allowances currently available to employees in addition to pay and propose their rationalization and simplification, ensuring that the pay structure is so designed as to take these into account.
6. It is to examine the principles governing the structure of pension and other retirement welfare and review of pension in the case of employees who have retired prior to the date of effect of these recommendations, bearing in mind that retirement benefits of all central government employees appointed on and after 1st January 2004 are covered by the New Pension Scheme.
7. It is to make recommendations on the above, providing due considerations to the following:
- The economic conditions in the country and the need for fiscal prudence.
- The need to make sure that adequate resources are available for developmental expenditures and welfare measures.
- The impact on the finances of the state govts, which usually adopt the recommendations with some modifications.
- The existing emolument structure and retirement benefits available to employees of central public sector undertakings.
- The best global practices and their adaptability and relevance in Indian conditions.
8. It is to make recommendation regarding the date of effect of its recommendations on all the above.
The 7th Pay commission has 18 months to make its recommendations. If necessary, it can send interim reports on any of the matters as and when the recommendations are finalized. The decisions lead to the benefit of improved pay and allowances as well as to the rationalization of the pay structure in case of central government employees and other employees included in the scope of the Seventh Central Pay Commission.
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