DA Hike 2024 : Will Dearness Allowance Merge with Basic Pay? Latest Update for Central Employees
the central government approved a 3% hike in dearness allowance (DA) for its employees and pensioners during a cabinet meeting. This move increased the total DA to 53% of basic pay, effective from 1 July 2024. While the increment brought relief to over 1 crore central employees and pensioners, discussions over merging DA with the basic salary have sparked debates yet again.
DA Hike 2024
The government announced the dearness allowance increment for the period of July to December 2024, ensuring compensation for the rising cost of living. While the increase is substantial, central employees have raised concerns about whether DA will eventually merge with their basic pay once it crosses the 50% threshold.
According to existing rules, DA remains separate from the basic salary. The Expenditure Department clarified that DA will not be merged with the basic pay, a practice discontinued since the Sixth Pay Commission.
Historical Background on DA Merger
The demand for merging DA with the basic pay arises from the Fifth Pay Commission’s recommendations. Between 1996 and 2006, DA exceeding 50% was merged into the basic salary, leading to revised calculations for allowances such as HRA and TA. However, the Sixth Pay Commission rejected this practice, and the government has since maintained DA as a standalone component.
This decision has left employees disappointed, as merging DA with basic pay could potentially increase other allowances. Employee unions argue that the merging practice should be reinstated to improve financial stability and align with inflation trends.
Why Merging DA Matters
If DA is merged with basic pay, it impacts multiple financial benefits, including:
- Higher HRA and TA: Allowances linked to the basic salary, like House Rent Allowance (HRA) and Travel Allowance (TA), would automatically increase by 25% upon merging.
- DA Reset to Zero: Once merged, DA calculations restart from zero, stabilizing pay increments over time.
- Improved Pension Benefits: Higher basic salaries directly benefit retirees, as pensions are calculated based on the final basic pay.
Despite these potential benefits, the government has reiterated that DA will remain a separate component, citing budgetary constraints and fiscal planning concerns.
Recent DA Hike and Expectations
With the DA now at 53%, many employees expected the merger rule to be reinstated. However, the government’s firm stand against merging DA with basic pay has left unions demanding reconsideration. The All India Railwaymen’s Federation and other employee organizations plan to raise this issue in the Eighth Pay Commission discussions.
Role of the Eighth Pay Commission
The anticipated Eighth Pay Commission may reignite debates around the merger of DA. Scheduled to address the evolving pay structure and inflation adjustments, the commission is expected to consider long-standing demands from employee unions. As DA percentages continue to rise, unions hope for favorable recommendations.
Recent DA Hike Details
The 3% DA hike announced in October 2024 applies retroactively from 1 July 2024. This decision benefits both employees and pensioners, with the latter receiving a similar Dearness Relief (DR) hike.
The updated DA rates aim to counter inflation but have reignited conversations around the financial benefits of merging DA with basic pay, especially given the rising cost of living.
