7th Pay Commission: Changes Expect in PF Contributions from July

The much-awaited Dearness Allowance (DA) and Dearness Relief (DR) is expected to be added to the salaries of central government employees by June. This will be done under the 7th pay commission for Central Government which has been due since January 2021 and is now expected to be deferred until June 2021. According to a Mint report, the government will continue to announce DA, but it will not get added to the central government employees’ (CGS) salary until June this year.

However, the Centre made it clear that the DA will be restored in three installments – January to June 2020, July to December 2020, and January to June 2021. The funds will be added to the salaries of central government employees and it will lead to a hike in the monthly Provident Fund (PF) contribution or PF balance in the long term, the report further cited.

Since the PF contribution is calculated on the basis of the monthly basic salary in addition to DA, the hike will directly increase PF balance in the long term for CSG employees.

The report also mentioned the latest figures released by the All India Consumer Price Index (AICPI) and said that a four per cent hike for January to June 2021, three per cent increase from January to June 2020, and four per cent rise for July to December 2020, is expected to get added in CGS employees’ existing DA, which at present is at 17 per cent. Assuming no further delays or extension of DA freeze, the employees’ DA is expected to rise up to 28 per cent from the existing 17 percent.

Close to 52 lakh CGS employees and 58 lakh pensioners are eagerly waiting for their DA and DR benefit restored since the Center froze both till June this year. The move may benefit the pensioners if no further delays are announced and they will get their new DR benefits from July onwards. The Centre gives DR benefit to its retired employees to help them beat inflation, similarly DA is provided to the current employees. Both current and retired CGS employees will benefit from a DA hike, as it is implemented to a pensioner’s DR as well.

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