Pension Update – There is good news for central government employees. Employees retiring on June 30 or December 31 will now get the benefit of the Notional Increment Policy, which will increase their pension. As per the new order of the Department of Personnel and Training (DoPT), employees who retire a day before the annual pay hike date will now be given this notional pay hike for calculating pension. You can find out more about this in this post.
As per the recommendations of the 7th Pay Commission, the Dearness Allowance is revised and pay hiked twice a year, from January 1 and July 1. However, the salary and Dearness Allowance hikes are announced in March and October/November. Those who retire very close to these dates did not get the benefit of this.
According to the new order of the DoPT, if an employee retires on June 30 or December 31, that is, one day before the annual pay hike dates of employees, i.e. July 1 or January 1, he will not have to face any loss. The government has clarified that employees who retire one day before the effective date of the pay hike will also be given the benefit of the pay hike in the calculation of pension. This benefit is applicable only to pension. It does not affect gratuity or other pension benefits.
When was the salary increment system changed? Before 2006, the salary increment date was different for each employee. But this system was changed from January 1, 2006. The process of implementing annual salary increment for everyone started from July 1. After this, it was changed again in 2016. Now two dates have been fixed for salary increment, January 1 and July 1. But this benefit was denied to employees who retired a day before these dates.
Many employees have also gone to court regarding this issue. In 2017, the Madras High Court ruled in favor of the employee in a case. This was implemented by the DoPT. After this, many such cases came to light across the country. The Supreme Court clarified again in 2023 and 2024 that if an employee works honestly throughout the year, he is entitled to a salary increase even on his last day.
Under what conditions will this benefit be available? The DoPT has taken this decision after consulting the Finance Ministry and the Law Ministry. According to the new order, this benefit will be available only to employees whose service is complete and satisfactory. The proposed pay hike will be used only for calculating pension. It will not affect other pension benefits.
The decision was taken after consultation with the Law Department. “The matter has been discussed with the Department of Expenditure (D/o Expenditure) and the Department of Legal Affairs (D/o Legal Affairs). It is advised that Central Government employees retiring on June 30 or December 31, who have completed the requisite qualifying service up to the date of retirement and have rendered satisfactory service, may be given the benefit of increment on July 1 or January 1 for the purpose of calculating pension,” the DoPT said.