Tarun Reflex

September 9, 2008

Government Employees: Implications of the SPC report

IT ALL started with the SPC bringing cheer to more than 50 lakh babus of the government of India. The babus are still busy, calculating their arrears and collecting information from various sources. ‘What will be my DA, what will be my pay band, what will be my basic pay, how much will I get by way of arrears, how much of the arrears will I get this year, what will be its impact on my income tax liability for the current year and the next, etc’ are amongst the plethora of questions to which they want to find an answer, given that the government is inclined to favour them with one benefit after benefit. It seems that the government has decided to keep its employees preoccupied with calculating their benefits until the next election. The benefits have puzzled the babus in the sense they do not know where to start and where to end in the context of the computation of the benefits. To put it in the computer nerd’s language, they don’t know the ‘begin_date’ and the ‘end_date’.
The way the government is heaping benefits on its employees, one gets the impression that the employees had starved for decades. Be it improving the basic pay scale or adding sparkling features to the pay band or reckoning even transport allowance for computation of Dearness Allowance or the latest carrot, viz., offering retirement benefit, the government has really pampered its employees. It is for the benefit of these babus, the following explanation is being offered, feature by feature. Are the babus ready to jot down, then?
  1. Full pension only after 20 years: You are entitled to full pension after completing 20 years of service. This offer is really attractive to those government employees who joined at an early age and now want to enter the private sector. Pension will act as a cushion after they give up the secure government job. The government has tried to attract young talent by incorporating this flexibility.
  2. Gratuity limit enhanced:Gratuity cap has been raised to Rs 10.00 lakhs from the present Rs 3.5 lakhs – a cool jump of approximately 300 percent! Of course gratuity is a function of the service put in by the employee and the last salary drawn. But it will provide adequate relief to employees retiring in the near future in the context of the scorching inflation of over 12 percent ruling for sometime now. They can invest this lump sum in any bank and generate over 10 percent by way of interest. It is a double bonanza for those on the verge of becoming senior citizens.
  3. Enhanced pension cap and floor limit: Government has raised the minimum pension of its employees from Rs 2,813/- to Rs 4,060/-. The upper ceiling has been raised to Rs 52,200/- from Rs 33,075/- at present. So the cap has been raised by a whopping 58 percent while the floor (minimum) has been raised by an impressive 44 percent. So employees in the higher salary bracket will benefit more when they retire.
  4. Live long and enjoy more:A new and unique dimension has been added to the new pension scheme. If you remain healthy post-retirement and hence live longer, your pension will increase proportionately. So once you turn 80, your pension will rise by 20 percent; similarly if you turn 85, your pension will rise by 30 percent; each additional five years there from will entitle you to a rise of over 10 percent.
  5. Arrears will not be taxed in the same year: Some confusion prevails with regard to computation of income tax in respect of arrears. Arrears would be released in two instalments of 40 percent and 60 percent in two financial years, viz., 2008-09 and 2009-10. Earlier it was reported that even though the arrears would be released in two instalments, the employee should reckon the arrears fully as income in financial year 2008-09. It spoiled the employees’ party since most of the first instalment of arrears released would have been gobbled up by the taxman this year. But the Finance Minister has reportedly clarified that only the arrears released this year, viz., 40 percent will be taxed.
  6. Benefits enhanced if employees dies while on duty:Ex gratia paid to the family of an employee killed in terrorist attacks or attacks by anti-social elements has been enhanced to Rs 10.00 lakhs. The family will be paid Rs 15.00 lakhs by way of ex-gratia if the employee dies fighting a war or battling militants or working at high altitudes characterised by hostile weather.
This will encourage the youth to join the army and undertake the task of safeguarding our borders.
It appears that government is determined to overhaul its departments and attract the youth. Government jobs had lost their sheen with the advent of a liberalized economy. The whole exercise seeks to benefit everyone in every possible way – right from hiking the emoluments paid to serving young employees to hiking the terminal benefits paid to outgoing employees. The exercise is sure to add some value to government jobs until of course the private sector hikes the benefits of its employees proportionately.

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