da hike central government employees: DA hiked to 50%, Key points central government workers should know.

Central government employees will receive a 5% raise in their salary because of the recent increase in Dearness Allowance (DA).

As per the recent announcement, the dearness allowance for employees under the central government will increase by 4%.

In Short

• Central government employees to receive 4 per cent hike in DA
• Dearness relief for central government pensioners also raised
• Increase effective from January 1, 2024

Pensioners of the central government are not left out either, as dearness relief (DR) has also been raised by 4 per cent to reach 50 per cent, aimed at mitigating the impact of rising prices.

According to information from the Press Information Bureau (PIB), this hike will result in a yearly expenditure of approximately Rs12,868.72 crore, benefiting about 49.18 lakh central government employees and 67.95 lakh pensioners.

Outlined in an Office Memorandum (OM) issued by the Ministry of Finance on March 12, 2024, here are six key points central government employees should be aware of regarding the basic pay hike.

Increase in Basic Pay – Effective from January 1, 2024, the Dearness Allowance rates for Central Government employees will rise from 46 per cent to 50 per cent of Basic Pay.

Understanding Basic Pay – Basic Pay, in the revised pay structure, refers to the pay drawn in the prescribed Level in the Pay Matrix as per 7th CPC recommendations accepted by the government, excluding other types of pay like special pay.

Distinct element – Dearness allowance remains a separate element of remuneration and is not considered as pay within the scope of FR 9(21).

Payment rounding – Payments involving fractions of Dearness Allowance equal to or above 50 paise will be rounded up to the nearest rupee, while fractions less than 50 paise will be disregarded.

Arrears payment – Arrears of Dearness Allowance will not be disbursed before the March 2024 salary disbursement date.

Applicability to other employees – These orders extend to civilian employees paid from the Defence Services Estimates, with expenses chargeable to the relevant head of the Defence Services Estimates. Both the Ministry of Defence and the Ministry of Railways will provide distinct directives for Armed Forces personnel and Railway employees.

Additionally, with the DA reaching 50 per cent, certain other allowances and components of central government employees’ salaries are set to increase, aligning with the recommendations of the 7th Pay Commission.

This includes House Rent Allowance, Children’s Education Allowance, Special Allowance for Child Care, Hostel Subsidy, Transportation Allowance (TA) on transfer, Gratuity Ceiling, Dress Allowance, and Mileage Allowance for Own Transport, as well as Daily Allowance.

Here are six key points about the basic pay increase as per an Office Memorandum (OM) from the Ministry of Finance dated March 12, 2024:

1. As of January 1, 2024, the Dearness Allowance rates for Central Government employees will go up from 46% to 50% of their base salary.
2. According to the office memorandum, Basic Pay in the modified pay structure refers to the pay drawn at the specified Level in the Pay Matrix in accordance with the Government-accepted recommendations of the 7th CPC. Special pay and all other forms of pay are not included.
3. The Dearness Allowance will remain a separate part of the salary and will not be considered as pay under FR 9(21).
4. Payments for Dearness Allowance exceeding 50 paise will be rounded up to the next whole rupee, while payments less than 50 paise will be ignored.
5. Arrears of Dearness Allowance will not be paid before the disbursement date of March 2024 salary.
6. Non-military staff who receive compensation from the Defence Services Estimates are also covered by the aforementioned directives. The respective head of the Defence Services Estimates must receive any associated expenses. Separate directives will be issued by the Ministry of Railways and the Ministry of Defence for employees of the railways and the allied forces.

Let us answer some key questions related to DA/DR:

Will dearness allowance be merged with basic salary?

From the available reports, this is an unlikely scenario. According to ET, the 7th Pay Commission did not propose any such measure, citing Sanjeev Kumar, who is the partner of Luthra and Luthra Law Offices, India.

What happened in a similar instance in the past?

The speculation of merging DA with basic pay arose because in a similar instance in the past, when basic pay touched the 50-per-cent mark, DA was merged with the basic pay. Merging DA with basic pay was the recommendation of the 5th Pay Commission report. In 2004, DA that represented 50% of the basic pay was merged as per this recommendation.

However, the later commissions, including the 6th Pay Commission, opted against such a merger.

What will happen to other allowances linked to the dearness allowance?

When DA reaches 50%, all other related allowances, including house rent allowance, daily allowance, gratuity ceiling, and hostel subsidy, will also be increased.

This happens because these allowances are linked to the DA, and as the DA rises, so do they.

HRA, children’s education allowance, hostel subsidy, dress allowance, daily allowance, and special allowance for childcare would all experience an increase in alignment.