A substantial advancement with respect to central government employees sees the government having embarked on the process of DA merger, resetting the DA number to 0 avoided saying percent. This is a major development that is expected to have future implications for the pay hikes and salary structure under the forthcoming 8th Pay Commission.
What Are DA Mergers?
This Dearness Allowance is a cost-of-living allowance provided by the government to employees and pensioners to offset inflation. It is revised twice during the year, in January and in July. Traditionally, after the DA crosses the 50% threshold, it is generally merged into the basic pay so that the pay structure and allowances are kept simpler. This is the practice normally followed after revisions of pay by earlier pay commissions.
The difference here is that with DA exceeding 50% in 2025, the government undertakes the merger of DA into basic pay — basically resetting the DA calculation to 0% and allowing it to grow again slowly with the subsequent inflation adjustments.
Why Is This Significant?
It is significant as it lays the foundation of the 8th Pay Commission, which may be implemented in the next financial cycle. When DA is merged with basic pay:
- Basic pay is swollen considerably.
- All other allowances, such as house rent allowance, travel, and pension are based on this swelled basic pay, which is to the benefit of employees.
- It induces a temporary freeze on the DA percentage, which after the merger would start from zero again.
Who Will Be Affected?
This above-mentioned decision shall affect more than 50 lakh central government employees and 60+ lakh pensioners. While there doesn’t appear to be any immediate financial loss, growth in the rate of DA will appear subdued to begin with until inflation works on it.
What Should Employees Expect Next?
- After merger, salary slips would be issued to show new basic pay and 0% DA.
- New DA hikes starting with zero is expected to be soon implemented from July 2025 onwards.
- Fitment factor inspections and announcements and new pay matrix under 8th Pay Commission have also to be made.
Conclusion
The DA merger is a strategic arrangement that benefits employees in the longer course of time through enhancement in basic salary and other allowances. While many may find the resetting of the percentage of DA tarnishing, it is just another way in which pay structures are revised and lays the groundwork for major salary reforms that are yet to come under the next commission.
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