8th Pay Commission: Govt Says Not Considering DA–Basic Pay Merger For Now

The Centre on Monday clarified in the Parliament that it is presently not considering any proposal to merge a portion of dearness allowance with the basic salaries of central government employees.

“No proposal regarding merger of the existing dearness allowance with the basic pay is under consideration with the government at present,” Minister of State for Finance Pankaj Chaudhary stated in a written reply before the Lok Sabha.

The clarification comes days after the government notified the Terms of Reference for the 8th Pay Commission. A number of employee unions had written to the Centre in recent days, seeking the immediate merger of 50% DA with basic pay.

Since the 8th Pay Commission is unlikely to be rolled out before 2027, the employee forums have pushed for the DA–basic pay merger at the earliest, which will lead to a higher basic pay, and calculation of subsequent DAs on the revised amount.

A higher basic pay will also result in a sharper salary hike when the 8th Pay Commission comes into effect. This is because the fitment factor or the multiplication unit used for pay revision is multiplied with the basic pay to determine the new salary. On the other hand, the DA component is reset to zero when the new pay commission comes into effect.

For instance, the 7th Pay Commission had recommended a fitment factor of 2.57, which raised the minimum salary in 2016 from Rs 7,000 to Rs 18,000 (Rs 7,000 x 2.57).

If no changes are made to the current pay structure, then the fitment factor to be recommended by the 8th Pay Commission will be multiplied with Rs 18,000 to determine the new minimum salary.

However, if DA is immediately merged with basic pay, then the basic salary would increase. Adding 50% DA would take the entry-level minimum salary to Rs 27,000.

As a result, when the 8th Pay Commission will recommend a fitment factor, it will be applied on the new base salary — Rs 27,000 in this case, instead of Rs 18,000. However, this scenario may not hold true if the 8th Pay Commission recommends to determine the new wages by multiplying the fitment factor with the basic salaries as fixed by the 7th Pay Commission in 2016.

Notably, under the 5th Pay Commission—which lasted from 1996 to 2006—the norm was to merge the basic pay with DA once the key allowance crossed 50%. Accordingly, the government had integrated DA with basic salary in 2004.

However, the 6th Pay Commission—implemented from 2006 to 2016—had discontinued this rule. The status quo remained under the tenure of 7th Pay Commission, which began from 2016.