In a significant yet bittersweet move for Central Government employees and pensioners, the Government of India has approved the merger of Dearness Allowance (DA) with basic pay. While this decision impacts the salary structure of over 50 lakh active employees and 65 lakh pensioners, it does not include a revision of the fitment factor, which remains at 2.57. This has led to mixed reactions—some relief due to structural benefits, but also disappointment due to the lack of an expected salary hike.
What is the DA Merger and Why Does It Matter?
The DA merger involves incorporating the accumulated Dearness Allowance into the basic salary. DA is meant to counter inflation by adjusting salaries accordingly. By merging it into basic pay, the government effectively resets the salary base, which influences other allowances and retirement benefits.
Why It’s Important:
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Standardizes Pay Structure: Reduces volatility in allowances and creates a stable salary framework.
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Prepares for Future Reforms: It is often seen as a precursor to the implementation of a new Pay Commission.
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Improves Retirement Benefits: With a higher basic, pensions and gratuities also see a boost.
The last such merger took place prior to the 6th Pay Commission, making this a long-awaited and consequential decision.
Understanding the Fitment Factor: Still at 2.57
The fitment factor is a multiplier used to calculate the revised basic salary during a pay scale transition. Currently, it stands at 2.57, which means that an employee’s basic pay is multiplied by this figure to arrive at the new pay level.
Key Details:
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Current Fitment Factor: 2.57
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Employees’ Demand: Increase to 3.00–3.68
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Government’s Decision: No change due to fiscal constraints
While employees were hoping for a hike to match the rising cost of living, the government has opted to maintain the status quo to manage budgetary pressures.
Benefits of DA Merger Without Fitment Hike
Even in the absence of a higher fitment factor, merging DA with basic pay delivers several structural advantages:
Financial and Retirement Benefits:
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Higher House Rent Allowance (HRA) and other benefits linked to basic pay
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Increased gratuity and pension base
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Greater contributions to Provident Fund (PF) and National Pension Scheme (NPS)
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Potential tax slab reclassification, depending on the revised gross income
Who is Affected?
This policy change extends across multiple categories of government personnel:
| Category | Affected by DA Merger |
|---|
| Central Government Employees |  Yes |
| Central Government Pensioners | Yes |
| Defence Personnel | Yes |
| Autonomous Bodies under GoI Pay | Yes |
Comparison Table: With vs Without Fitment Factor Hike
| Criteria | With Fitment Factor Hike | Without Fitment Factor Hike |
|---|
| Revised Basic Pay | Higher | Moderate |
| Dearness Allowance (%) | Reduced post-merger | Reduced post-merger |
| Net Monthly Salary | Significant Increase | Slight Increase |
| HRA & Other Allowances | Substantially Higher | Increased |
| Pension Calculation Base | Higher | Moderate |
| Income Tax Bracket | Likely to change | Less likely |
| Govt Financial Burden | High | Controlled |
Govt’s Stance on No Fitment Factor Hike
The government has defended its decision citing the following:
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Budgetary Discipline: Salaries and pensions already consume a significant portion of the national budget.
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Inflation Management: A larger hike could fuel inflation.
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Upcoming 8th Pay Commission: Potential restructuring might bring major changes, so the current approach is cautious and transitional.
What Employees Should Do Now
Employees and pensioners should take proactive steps to understand and adapt to the new structure:
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Verify revised pay slips post-merger for accuracy.
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Review adjustments in allowances like HRA, Transport Allowance, and Children Education Allowance.
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Update tax planning based on the revised income.
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Pensioners should check updated pension disbursement slips.
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Stay informed on 8th Pay Commission developments, which may bring broader reforms.
Quick Reference Table: DA Merger Impact Summary
| Criteria | Status After Merger |
|---|
| DA Merged with Basic Pay | Yes |
| Fitment Factor |  No Change – Remains 2.57 |
| Minimum Basic Salary | Unchanged |
| HRA/Allowances | Likely to Increase |
| Net Salary | Slight Increase |
| Pension Calculations | Based on New Basic |
| 8th Pay Commission |  Not Yet Announced |
FAQs
Q1: What is the current fitment factor for Central Government employees?
A: It remains at 2.57, despite demands for an increase.
Q2: Will the DA merger lead to higher take-home pay?
A: Yes, but only marginally. Increases in allowances may boost the net salary slightly.
Q3: How does the DA merger impact pensioners?
A: Pensions will be recalculated based on the revised basic pay, offering modest increases.
Q4: Why didn’t the government raise the fitment factor?
A: Due to financial constraints, inflation control goals, and anticipated reforms under the 8th Pay Commission.
Q5: Is there any update on the 8th Pay Commission?
A: As of now, no official announcements have been made regarding its timeline or structure.
This development, while a step forward, is seen as a holding action before broader reforms. The DA merger resets the foundation for future salary and pension enhancements, though many await the next Pay Commission for more substantial changes.
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