7th Pay Commission: After the implementation of 7th CPC (Central Pay Commission), fitment factor was one of the most talked about topic among the central government employees. Reason for so much thrust on Seventh Pay Commission fitment factor was its role in final calculation of a central government servants (CGS) salary. According to the Seventh Pay Commission recommendations, a central government employee’s salary other than allowance is decided by one’s basic salary and fitment factor.
7th CPC Salary: Fitment factor
According to 7th CPC recommendations, the fitment factor is 2.57. While deciding a central government employee’s salary other than allowances like Dearness Allowance (DA), Travel Allowance (TA), House Rent Allowance (HRA), etc., one’s basis salary is multiplied with the 7th CPC fitment factor, which is 2.57. For example, if a central government employee’s basic salary is ₹18,000; then its salary other than allowance will be ₹46,260 ( ₹18,000 X 2.57).
Seventh Pay Commission: DA hike calculation
Once, a central government employee’s monthly salary other than allowance is finalised. Then there are various allowances like DA, TA, HRA, medical re-imbursement, etc. A central government employee’s DA is hedge against inflation. It is announced twice in a year for January to June and from July to December period. While announcing DA, center makes averaging of inflation rise during the first six month of the year and then next six month of the year. On the basis of that, they announce the nearest round figure as DA hike, which is higher than the average inflation. Currently, average inflation is around 3.5 per cent (as per the AICPI) for July to December 2020 period. That’s why speculation is rife that DA hike due for January to June 2021 would be at least 4 per cent.
Once DA hike is announced, a central government employee’s TA goes up to the tune of DA hike automatically. So, DA hike is linked to TA also. Similarly, HRA and medical reimbursement is calculated and once all heads under the allowance is calculated, a central government employee’s monthly CTC is decided.
PF, Gratuity deduction
After all allowance and salary other allowance is finalised. Then comes the deductible portion like monthly Provident Fund (PF), Gratuity contribution, etc. Since PF and gratuity contribution is linked to basic salary and DA. One’s PF and gratuity contribution is decided using this formula. After all deductibles are finalised, then the net monthly salary is decided by deducting the PF, Gratuity and other monthly contributions from one’s net CTC. After this deduction, a central government employee’s monthly take home salary is decided.