An intriguing discussion for the central government employees has been envisaged on the merger of the Dearness Allowance (DA). The employees have practically turned the pages of their minds in decoding the impact of the merging of DA with the basic salary. The decision on the merger would mean better basic pay calculation and subsequently, pension calculation, HRA, and other allowances. Probably the most important change here is that after the merger of DA, the existing DA percentage is reset to zero, and the calculation of DA starts afresh from the very next revision cycle.
What Is DA Merger?
Central government employees and pensioners have been granted DA in nature of inflation compensation. The revision happens twice a year- January and July. The revision is done based on any change observed in the Consumer Price Index (CPI) registered by the shops. When the DA reaches a significant percentage (usually 50%), the government may decide to merge it with the basic pay, leading to a higher salary structure.
Why Does DA Becomes Zero After Merger?
Once DA is merged with the basic pay, it has already been absorbed into the salary structure, causing the DA percentage to reset back to zero. The second instance relates to the recalculation of DA, which shall now be commenced right from the base downwards. For instance:
- Assuming basic pay is ₹30,000 and DA has risen to 50 percent (₹15,000).
- Subsequently, after the merger, the basic pay will be ₹45,000, but let us say that DA becomes zero.
- The next DA revision will be done whereby, as you see, the new percentage on ₹45,000 will be good news for these employees going forward.
Implication Of DA Merger On Employees
1. Salary Increase
- Since DA is merged into basic pay, employees’ gross salary rises which is an improvement to their financial life.
2. Higher Pension & Retirement Benefits
- Pension is calculated based on basic pay + DA, so a higher basic pay leads to a higher pension.
- Other retirement benefits like Gratuity and PF contributions will also be higher.
3. Restructuring Other Allowances
- HRA, travel allowance, and other benefits will increase for the employees as these allowances are calculated as a percentage of basic pay.
Conclusion
The DA merger helps improve employees’ basic salary and pensions. Although the DA percentage may fall to zero, the long-term impact of these actions is still favorable as all the future increments and allowances will be based on the revised higher basic pay. Now the employees are looking forward to an official announcement from the government concerning the next DA merger under the 7th Pay Commission.
Also Read: 7th Pay Commission: Central Employees To Get 53% DA Added To Basic Salary