PAY REVISION COMMISSION

The pay structure of the Central Government employees is based on the recommendations of Pay
Commissions set up by the Central Government. While some state governments also broadly
follow the recommendations of the Central Pay Commissions for their employees also a few
other state governments set up their own pay commissions.

During the past 50 years, Government of India has set up five pay commissions. The
recommendations of the Fifth Pay Commission, which submitted its report in 1997, as accepted
by the Government are currently in force. Pay Commissions also cover a wide range of
employees in the public sector.

A Joint Consultative Machinery was set up by the Central Government to discuss matters
relating to welfare of the employees and improvement of efficiency and standards of work. The
scheme provides for a limited extent of compulsory arbitration on the following subjects:

(i) Pay and allowances,

(ii) Weekly hours of work, and

(iii) Leave of a class or grade of employees.

The Government, however, becomes the final authority in deciding whether an issue can or
cannot go for arbitration.

Pay Commissions which were set up at regular intervals function non-statutorily, study the
problems establishing their own procedures for the collection of data and information and make
recommendations to the Government. Though these recommendations are given much
weightage, the ultimate responsibility lies with the government whether to accept, or modify or
reject some of them.

THE FIRST CENTRAL PAY COMMISSION

 The First Central Pay Commission recognised that the influence of the law of demand
and supply cannot be wholly ignored in fixing the salaries of public servants.
 The fairness and adequacy of the salary proposed must be judged balancing the interests
of the employee, employer and the public.
 The Commission stated that an employee must be paid a `living wage'.
 However, with the Fair Wages Committee's clarification of the concept of living wage it
becomes clear that the living wage which was recommended by the Commission should
actually be the minimum wage.
THE SECOND CENTRAL PAY COMMISSION

 The Second Pay Commission also referred to the principle that as a matter of social
policy, the lowest rate of remuneration should not be lower than a 'living wage' and the
highest salaries also should be kept down.
 It is consistent with the essential requirements of recruitment and efficiency.
 The Commission reached the conclusion that the minimum wage or salary should not
salary should not be determined merely on economic considerations, but should satisfy
also a social test' - both because of its intrinsic validity and because of its bearing on
efficiency.
 Even above the minimum level Government should remunerate their employees fairly;
for those who serve the State, as well as others, are entitled to fair wages (Second Central
Pay Commission Report).

The first two Central Pay Commissions stressed that the minimum wage must satisfy a social test
and that wages above the minimum should be 'fair'.

THE THIRD CENTRAL PAY COMMISSION

The major requirements of a sound pay system quoted by the Third Pay Commission included
inclusiveness, comprehensibility and adequacy.

 Inclusiveness - the pay structure and career pattern adopted for the civil service should
broadly be adopted by autonomous quasi-governmental organisations also. Secondly, the
large- scale appointment of casual, contingency, and work-charged employees should be
discouraged and kept to the minimum.
 Comprehensibility - the pay scale proper should provide a true and comprehensible
picture of the total remuneration given to the Government employee.
 Adequacy - the pay structure should be adequate both internally and externally.
Individual attributes such as education, training and skill should be taken into account for
internal adequacy. For being externally adequate, the pay structure should provide for
some measure of protection of living standards.

None of the above pay commissions viewed that the Government should be assigned the role of
`Model employer' by paying higher wages and salaries. However, it was observed that the
Government must be guided by the objectives and principles prescribed by the Pay Commission.

THE FOURTH CENTRAL PAY COMMISSION

  The Fourth Central Pay Commission (1984) disagreed with the First and Second Pay
Commissions which rejected the 'model employer principle'.
 The Commission expressed that a model employer need not necessarily pay higher wages
than other good employers.
 "A `model' is above the ordinary or above that which is the minimum, or higher than
what others are content with or what is good enough to serve their purpose".
 Another important factor in wage determination is the cost of living.

THE FIFTH CENTRAL PAY COMMISSION

 The Fifth Central Pay Commission, which submitted its report in 1996, made some
proposals linking pay revision with work organisation and manpower planning.
 It recommended 40 per cent increase in pay and 30 per cent reduction in manpower over
a three year period, new modes of recruitment, including contract employment, and
innovative suggestions on training, performance appraisal, career progression, transfer
policies and accountability.
 The government accepted the first part of the recommendations and not the second part.

The problem with pay commissions is twofold:

 Firstly, they are not able to relate recommendations with the principles they enunciate.
 Secondly, governments usually tend to take economic decisions on political
considerations.