8th Pay Commission: Confederation Secretary General S.B. Yadav says that because the current rules do not fit today’s salaries and inflation, the limits that were appropriate 10-15 years ago are no longer providing full benefits to employees.
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8th Pay Commission: The biggest demands of employees regarding the 8th Pay Commission relate to bonus, PF, and gratuity. Employee organizations say that the ceiling is now outdated. Considering inflation, salary structure, and long service, there is a growing demand to remove or increase the limits. The government has not yet made any decisions, but the demands are on record. The Confederation of Central Government Employees and Workers has submitted these demands to the Cabinet Secretary.
Why did the demand arise to remove the bonus, PF, and gratuity limits in the 8th Pay Commission?
Simple answer: Confederation Secretary General S.B. Yadav says that this is because the current rules do not fit today’s salary and inflation. The limits that were appropriate 10-15 years ago no longer provide full benefits to employees.
What do the rules say now?
Bonus
Central government employees typically receive a Productivity Linked Bonus (PLB) or ad-hoc bonus.
A threshold of ₹7,000 or the minimum salary applies when calculating bonuses.
Annual bonuses are typically limited to around ₹7,000 x 30 days.
Problem: Even those with a high basic salary receive a bonus on the same limited basis.
Provident Fund (PF)
PF contribution: 12% of Basic + DA (employee + government)
But the EPF Act limits basic salary to ₹15,000. Contributions above this limit are optional.
Problem: Those with high salaries may not have enough PF for retirement.
Gratuity
Current maximum limit: ₹20 lakh
Eligibility: Minimum 5 years of service
Formula: (Last Drawn Salary × 15 × Years of Service) / 26
Problem: Despite long service and high salaries, the ₹20 lakh limit is quickly reached.
What are employee organizations demanding?
1. Remove all ceilings on bonuses.
- Bonuses should be linked to actual salary.
- The minimum wage or fixed amount requirement should be eliminated.
2. Include the entire salary in PF.
- Remove the basic salary limit of ₹15,000.
- The entire Basic salary plus DA should be mandatorily credited to PF.
3. Increase the gratuity limit.
- The ₹20 lakh limit should be
- Either increased to ₹30-40 lakh.
- Or the limit should be completely exempt.
Why did the government impose these limits in the past?
There were three major reasons:
- To control government expenditure
- To provide a uniform structure for all employees
- To balance retirement benefits
- But now the salary structure has changed.
Why is change now considered necessary?
- DA has reached above 50%
- Salary multiples have increased
- Employees are serving longer
- PF and gratuity are more flexible in the private sector
- Old formulas no longer fit today’s reality
What does this mean for you if you’re a central government employee?
- PF limit removed – larger retirement corpus
- Gratuity increased – more cash at retirement
- Bonus changed – better cash flow each year
- If you’re planning for retirement…
- The financial value of a government job will increase
- Post-retirement dependence will decrease
Can these changes in the 8th Pay Commission be implemented immediately?
The reality is: these are demands, and the government hasn’t officially approved them. However, the gratuity was raised to ₹10 lakh – ₹20 lakh last year (7th CPC). Therefore, this expectation cannot be completely dismissed.
Who benefits, who loses?
Benefits
- Employees with long service
- Higher-grade officers
- Employees nearing retirement
Disadvantages
- Fiscal burden will increase
- But employee satisfaction and stability will also increase.
What could happen next?
A possible approach is to adopt a phased approach instead of removing all limits at once. First, increase gratuity, then revise the PF limit, and partially change the bonus formula.
