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Highest Salary and Ratio between Minimum & Maximum Salary: Chapter VI of NC, JCM Staff Side memorandum to 7th CPC

Chapter VI

Highest Salary

For other Part of NC, JCM (Staff Side) memorandum to 7th CPC Click here to view

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The First Pay Commission considered that the maximum salary should not be more than Rs.2,000/- p.m. but allowed, however, certain posts to continue in the pay scale of Rs. 2250/-and more than Rs. 3000/-.

6.2. The Second Pay Commission took note of the point raised by the staff associations that huge disparity between the highest and lowest salaries were incompatible with the government’s avowed socialist objectives causing dissatisfaction amongst the low paid employees. According to them in 1939-40 the ratio was 1 : 257, which got reduced in 1947-48 as a result of First Central Pay Commission recommendation to 1 : 38.

6.3. The Second Pay Commission conceded that ratio of 1: 28.5 (in 1957-58) was disproportionately wider than in the government services of other countries. In UK it was 1 : 15, in US Federal service 1:5, in Canada 1: 6, in Australia 1: 13.6 and in Japan 1 : 4.7 all having no socialistic pretentions. The Commission did not make any recommendation to bring down the ratio.

6.4 The maximum salary of Rs.3000/- remained unchanged even after Second Pay Commission and till the year 1965 when the Government further raised the maximum salary to Rs. 3500/-.

6.5 The Third Central Pay Commission rejected the claim for further increases in the highest salaries on the ground that it might neither be socially acceptable nor administratively prudent especially in the background of the financial stringencies and developmental needs. The Commission concluded that no reduction in the maximum wage would also be justified as it would affect the morale of senior civil servants adversely. The maximum salary therefore continued at Rs.3500/-.

6.6. The Fourth Central Pay Commission noted that the ratio had been changing over the years as under:

Pay Commission Disparity Ratio
1st CPC (1947-48) 1 : 41.2
2nd CPC (1959-60) 1 : 28.5
3rd CPC (1972-73) 1 : 11.9

6.7. They also expressed the view that efforts should be made to further reduce the rate of disparity in the lowest and highest wages. The 4th Central Pay Commission recommended full neutralization rate of DA to senior officers. Prior to the implementation of the 4th Central Pay Commission DA formula, there had been 100% neutralization for employees 75% and 65% neutralization for senior officers. The said recommendation also enormously raised the salary level of offcers.. The phenomenon of gradual reduction of the rate of disparity due to different rate of DA compensation was halted. The ratio between minimum and maximum remained static thereafter. With the advent of the drastic reduction of rates of personal income taxation, the inherent compression of emoluments of senior officers also disappeared.

6.8 The ratio of minimum and maximum pay prevailing in some selected countries is as under:

Malaysia 1 : 3
Sweden 1 : 4
France 1: 6.6
Indonesia 1: 6.9
Australia 1: 7.7
China 1: 8
Thailand 1: 9
Honkong 1: 40

6.9 The Fifth Central Pay Commission for the first time discarded the approach of fixing maximum salaries on the basis of predetermined minimum-maximum disparity ratio and charactering the practice as arbitrary. They wanted certain norms to be evolved for bench marking the maximum wage on the same pattern as need based norms serve as bench marking for minimum wage. The visible change in the attitude was the product of the neo-liberal economic policies of the Government. The 5th CPC entrusted the job of evolving such a norm to the Indian Institute of Public Administration(IIPA), a body mostly consisting of retired senior bureaucrats. 
6.10 The IIPA computed the average consumption level of senior officers at Rs. 14,839/-. This was estimated to be 49% of the salary. Accordingly they fixed Rs. 36,000/- for Secretary level officers and Rs.40,000/- for Cabinet Secretary. But 5th CPC determined the highest wage of Rs.30,000/- for Cabinet Secretary. 
6.11 The 6th CPC computed the maximum wage by a multiplication factor of 3 whereas the multiplication factor applied in the case of intermediary and lower pay scales was only 2.2. 
6.12 From the above review, it becomes amply clear that so far there has been no established norm for fixing the maximum wage of a civil servant and the need for determining a reasonable ratio between the minimum and maximum salary. We suggest that ratio to be 1 : 8. 
6.13. Except in the case of Hongkong, which like our country was a colony of the British empire, no country has a ratio beyond 1 : 7. Once the minimum is computed on a widely accepted norm (15th ILC), the scientific and acceptable approach must be to have a pre-determined multiplication factor for fixing pay at the top and intermediary levels. In the background that there is presently no distinction between officers and employees in the matter of neutralization of rise in prices and cost of living, it is not desirable that the maximum must go beyond 8 times of the minimum. We, therefore, suggest that the maximum salary may be fixed at 8 times of the minimum salary.

For other Part of NC, JCM (Staff Side) memorandum to 7th CPC Click here to view

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