7th Pay Commission Latest News – Govt may increase minimum pay and fitment formula

7th Pay Commission Latest News – Govt may increase minimum pay and fitment formula to avoid Strike on 11th July 2016 – After Staff Unions met council of ministers, govt accepts to form a Committee to review minimum pay and fitment formula

Under pressure from the unions, the government has indicated that it may increase the minimum monthly pay of central government employees beyond the Rs.18,000 suggested by the Seventh Pay Commission, seeking to defuse a strike threat.

The assurance has divided several government unions on whether to go ahead with the indefinite strike starting 11 July.

Three cabinet ministers—finance minister Arun Jaitley, home minister Rajnath Singh and railway minister Suresh Prabhu—met representatives of several government staff unions late on Thursday for almost two hours and assured them that their demand would be looked into.

The unions have been demanding Rs.26,000, higher than theRs.18,000 approved by the cabinet on Wednesday on the Seventh Pay Commission’s report. The government said it was more than doubling minimum pay from Rs.7,000 after accepting the recommendations of the commission, which would put an extra Rs.1.02 trillion in the hands of 10 million government employees and pensioners.

“Three top ministers called us and we met at Rajnath Singh’s house for two hours till 11pm last night. We have been assured that the minimum wage issue is going to be referred to one of two committees that the government is setting up to rectify any anomalies in the pay commission recommendations’ implementation,” said Shiva Gopal Mishra, general secretary of the National Joint Council of Action (NJCA), a confederation of several government staff unions.

The council claims a membership of 3.3 million, including workers of Indian Railways, the country’s largest employer.

Mishra said Jaitley accepted their concern. “He said the government will try to rectify some of our demands, including minimum wage,” the NJCA general secretary said.

Union leaders claimed that the pay commission’s recommendation and the government’s announcement raising minimum pay from Rs.7,000 to Rs.18,000 had glossed over the fine print.

“Now, base pay plus dearness allowance (DA) makes the minimum wage Rs.15,700. They have increased it to Rs.18,000,” said K.K.N. Kutty, national president of the Confederation of Central Government Employees and Workers.

“When you are doing away with DA in the new system, the hike cannot be just Rs.2,000,” said C. Srikumar, general secretary of the All India Defence Employees Federation, a union of civilian workers in factories and establishments under the ministry of defence.

Mishra said the home minister assured them that “their interaction with us has the blessings of PM Narendra Modi”.

“On minimum wage, we are for a negotiated settlement and it seems there is some consideration at the highest level,” he added.

An office-bearer at an employees’ union said the government’s offer had posed a dilemma to union leaders, noting that it wasn’t a written assurance, “without which it will be tough to accept that the government is indeed serious in reworking the minimum wage”.

The offer had ended up dividing the unions on whether to proceed with the strike, this person said on condition of anonymity. “And we could not reach a conclusion on Friday on our next course of action,” he said, adding that the railway workers’ union was hesitant about going on strike.

Mishra, who is also the general secretary of All India Railwaymen’s Federation, sounded a conciliatory note.

“We are fighting for the welfare of our own workers…a strike is an option if government does not listen to us. There seems to be a political willingness to solve what we are demanding and that’s what was indicated last night,” Mishra told reporters in New Delhi.

On Friday, NJCA wrote to all unions that “government has proposed to refer the issue of minimum wage and fitment formula (for calculation of salary) to a committee for reconsideration. The NJCA will await communication in this regard from the government”.

It said that it will meet on 6 July again to decide on the proposed strike.

What is interesting is that increasing the minimum pay will change the salary fitment calculations. If the minimum wage is hiked from Rs.18,000 to even Rs.20,000, the fitment rate will be higher than the 2.57 times approved by the government based on the pay commission recommendations.

“If the 2.57 fitment formula is tinkered with, then salary and pension in general for all segments of employees will go up, putting further stress on the exchequer. So the government has to walk a fine balance and a lot of homework is required,” said a government official, who declined to be named.

The acceptance of the pay commission recommendations is a potential boost to the consumer economy.

A further hike could lift consumption further, but it will be tough on government finances, the official said.

Rating agency India Ratings and Research Pvt. Ltd said the gross impact of pay hike on the economy is likely to be Rs.94,775 crore.

“The central government will receive income tax on this payout and collect excise duty on consumption, after sharing the increase in income tax and excise duty with states. Thus the net impact on the central government finances is estimated to be Rs.80,641 crore,” said D.K. Pant, chief economist of India Ratings and Research.

Source: Livemint