The Central Government has officially approved the merger of Dearness Allowance (DA) with the basic pay for all Central Government employees and pensioners. While this is a major change in the salary structure, it comes with a bit of disappointment. The expected increase in the fitment factor has not been approved, and it will remain unchanged at 2.57. This decision affects more than 50 lakh employees and 65 lakh pensioners across India.
What is DA Merger and Why is it Important?
Dearness Allowance is a part of the salary given to employees to help them cope with rising inflation. When DA is merged with the basic pay, it increases the overall salary base, making future hikes and benefits more meaningful.
This move is important because:
- It simplifies the salary structure.
- It helps standardize payments across departments.
- It sets the stage for the next Pay Commission by resetting the base pay.
Understanding Fitment Factor: What Does 2.57 Mean?
The fitment factor is used to multiply the old basic salary to calculate the new basic salary in a revised pay structure.
- Current fitment factor: 2.57
- Employees’ demand: 3.00 to 3.68
- Government’s decision: No change, remains at 2.57
This means that though DA is merged with the basic salary, the expected jump in the total salary is smaller than what employees were hoping for.
Who Benefits from the DA Merger?
Despite no change in the fitment factor, the merger still brings many benefits:
- Higher House Rent Allowance (HRA) and other allowances which are based on basic pay
- Increase in gratuity and pension calculations
- More contribution to Provident Fund (PF) and National Pension Scheme (NPS)
- Possible change in income tax slabs due to revised pay structure
Groups impacted include:
- Central Government Employees
- Pensioners
- Defence Personnel
- Employees of autonomous bodies under Government of India
Comparison: With vs. Without Fitment Factor Hike
| Particulars | With Fitment Factor Hike | Without Fitment Factor Hike |
|---|---|---|
| Basic Pay | Higher | Moderate |
| DA (%) | Reduced after merger | Reduced after merger |
| Net Salary | Significantly Higher | Slight Increase |
| Allowances | More | Still increased |
| Pension | Higher Base | Moderate Increase |
| Tax Impact | More likely | Less likely |
| Govt. Cost | Very High | Balanced |
Employees’ Expectations vs. Government’s Stand
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| Aspect | Employees’ Demand | Govt’s Final Decision |
|---|---|---|
| DA Merger | Yes | Yes |
| Fitment Factor | Increase to 3.00–3.68 | No change – stays at 2.57 |
| 8th Pay Commission | Early implementation | No update yet |
| Minimum Basic Salary | ₹26,000 | No change |
| Arrears | Expected | Not applicable |
Why No Increase in Fitment Factor?
The government has given clear reasons for not increasing the fitment factor:
- High financial burden on the central budget
- Need to control inflation and public spending
- Already high expenses on salaries and pensions
- Upcoming financial impact of the 8th Pay Commission
In short, the government wants to offer moderate relief without adding extra strain to the economy.
What Should Employees Do Now?
Employees should take note of the changes and adjust their financial planning:
- Review the new salary slip after the DA merger is reflected
- Check updates in HRA, TA, and CEA (Children Education Allowance)
- Recalculate income tax based on the revised salary
- Pensioners should check new pension calculations
- Stay alert for news related to the 8th Pay Commission
Summary Table: Key Impact of DA Merger
| Criteria | Post-Merger Status |
|---|---|
| DA Merged with Basic | Yes |
| Fitment Factor | No change (2.57) |
| Minimum Basic Pay | Unchanged |
| Allowances | Likely to increase |
| Net Salary | Slight increase |
| Pension Calculations | Based on revised pay |
| 8th Pay Commission | Not announced yet |
Conclusion
The merger of DA with basic pay is a welcome step for Central Government employees and pensioners. It brings some financial relief and better pension benefits. However, the decision to keep the fitment factor unchanged at 2.57 has left many employees disappointed. While this move stabilizes the salary structure, hopes now shift to the upcoming 8th Pay Commission for a more meaningful revision in pay and benefits.
