Salary Update 2025: Major Shift in Central Government Pay Structure Likely, DA Merger Under Consideration

April 15, 2025

Central Employees May See Major Change in Salary Framework

In what could be a significant development for central government employees and pensioners, the government is reportedly considering merging the Dearness Allowance (DA) with the basic salary. With the current DA reaching 55%, this potential move would reset the DA percentage to 0%, triggering a major shift in the salary structure. While no official notification has been released yet, sources suggest that internal discussions are underway.

This proposal echoes a previous major revision made in 2006, when the DA crossed 125% and was then merged into the basic pay under the 6th Pay Commission.

What the DA Merger Means for Employees

The Dearness Allowance is a cost-of-living adjustment given to central employees and pensioners to offset inflation. It is revised bi-annually. Recently, the DA was increased by 2%, raising it from 53% to 55%, benefitting millions of employees and retirees.

If merged into basic salary, the implications are:

• Basic salary would see a 55% increase instantly.

• Other allowances like HRA, TA, and retirement benefits will rise accordingly.

• Employees would benefit from higher future increments and pension contributions.

For pensioners, Dearness Relief (DR), which mirrors DA, would also be added to the basic pension, ensuring long-term gains.

Connection to 8th Pay Commission Implementation

According to recent media reports, the 8th Pay Commission could be implemented by 2027. Merging DA with basic pay might be a precursor to restructuring salaries in line with the upcoming recommendations. This move could provide a more stable and transparent salary framework before the next major pay revision.

Future Outlook: DA Expected to Reach 58% by Year-End

Economic experts anticipate that the DA might touch 58% by late 2025. If the merger takes place prior to or alongside the 8th Pay Commission’s implementation, employees could experience dual benefits — a revised basic pay and a fresh DA cycle.

In states like Haryana, which typically align with central policies, this change may also positively impact state government employees.

Historical Precedent: A Strategic Long-Term Move

The merging of DA into basic pay is not new. It’s a historically recognized practice adopted when the allowance surpasses a defined threshold. The objective is to streamline salary structures and enhance employee benefits in the long term.

Financial Planning Tip for Employees

In light of these potential changes, central employees are advised to review their financial plans. An increase in take-home salary and retirement benefits can offer opportunities for strategic savings or investment. Long-term financial goals should be aligned with the evolving salary structure to maximize benefits.