With the 8th Pay Commission gaining momentum and the demand for increasing the fitment factor on the rise, central government employees and pensioners are keeping a careful eye on how their House Rent Allowance (HRA) will be raised. Central government employees are eagerly awaiting a revision in basic pay as a higher basic pay will result in a rise in HRA which is normally calculated as a percentage of basic pay.
Several employee unions and representative bodies representing central government employees have demanded an increase in HRA as a relief measure for employees facing high inflation. The All India NPS Employees Federation recommends 36 percent HRA for X category cities, 24 percent for Y category cities and 12 percent for Z category cities. National Council-Joint Consultative Machinery, All India Defence Employees Federation and Federation of National Postal Organisations demanded that HRA should continue in three slabs: 40 percent (X), 35 percent (Y) and 30 percent (Z) and should be linked with DA. The Indian Railways Technical Supervisors Association demanded that HRA be 40 percent, 30 percent, 20 percent and 10 percent for different classes of cities.
8th Pay Commission: How will increase in fitment factor drive higher HRA?
The fitment factor is a multiplier used to revise the current basic pay and pension. Once the commission finalizes this factor, it will be applied uniformly across pay levels to determine the new basic salary and pension. A higher factor will result in higher HRA because it creates a massive jump in the monthly base salary of the employee. Since the HRA is calculated as a fixed percentage of the basic pay, a higher multiplier automatically results in a larger HRA payout.
8th Pay Commission: What will be estimated HRA?
HRA is a significant component of an individual’s pay slip. It is provided by the employer as an allowance for rental accommodation. The HRA amount provided to the employees varies in different cities. Employees can claim HRA if they live in rented houses or flats but if they live in self-owned houses or flats then they cannot claim HRA.
When the 7th Pay Commission was implemented, it decided on the HRA in the ranges of 27 percent, 18 percent and 9 percent for X, Y and Z class cities respectively. However, when the Dearness Allowance (DA) reached 50 percent, the HRA rates were increased to 30 percent, 20 percent and 10 percent for X, Y and Z class cities respectively.
As per a Bankbazaar calculation of the estimated HRA increase for Level 14 and 18 employees at a 2.57 fitment factor in the 8th CPC, the following assumptive figures can be estimated.
Basic Pay (Level 14): Rs 1,44,200
Fitment Factor: 2.57
Revised Basic Pay: Rs 3,70,590
HRA (X City – 30 percent): Rs 1,11,180
HRA (Y City – 20 percent): Rs 74,120
HRA (Z City – 10 percent): Rs 37,060
Basic Pay (Level 18): Rs 2,50,000
Fitment Factor: 2.57
Revised Basic Pay: Rs 6,42,500
HRA (X City – 30 percent): Rs 1,92,750
HRA (Y City – 20 percent): Rs 1,28,500
HRA (Z City – 10 percent): Rs 64,250
However, these figures are merely illustrative. The final HRA structure under the 8th Pay Commission may differ depending on the recommendations and implementation of the central government.
