Salary will increase with the 8th Pay Commission, but why will your DA become zero? understand the whole game

There is a wave of happiness among government employees with the news of approval of the 8th Pay Commission. After all, that would be a big jump in salary! But with this happiness an old question arises again – “Why does our Dearness Allowance (DA) become zero after every new pay commission?”

This question comes to the mind of almost every employee. So let us remove this confusion forever and understand this entire mathematics in simple language.

First of all, what is the real job of DA?

Understand it like this that Dearness Allowance (DA) is a temporary part of your salary. The government increases it every six months so that rising inflation does not have a direct impact on your pocket. This is a kind of “top-up” that keeps your salary in line with the market.

Now comes the role of Pay Commission

Every 10 years, a pay commission comes, which does not just do small “top-ups”, but also changes your entire salary structure. It looks at the total inflation of the last 10 years and increases your basic salary to the extent that it is in line with today’s expenses.

Real Magic: Merger of DA with Basic Salary

This is where the answer to your question lies. Just before the implementation of the new pay commission, your DA forms a major part of your basic salary (like 40-50% or even more).

What does the new pay commission do? He adds that entire DA to your old basic salary forever. To do this, a ‘magic number’ is used, which is called fitment factor.

So why does DA become zero?

Understand it like this, the government has settled your old account (i.e. all the DA till now) by adding it to your new basic salary.

As long as all the inflation has been added to your new basic salary, there is no point in paying separate DA for that old inflation. Therefore, the DA meter is reset to zero, so that new inflation measurements in the future can now start from zero.

Understand the whole mathematics with an example

Suppose, before 8th Pay Commission:

• Your basic salary: ₹40,000
• Dearness Allowance (DA): 46% (i.e. ₹18,400)
• Your total earnings (without allowances): ₹58,400

Now the 8th Pay Commission came and suppose the fitment factor was fixed at 2.57.

• Your new basic salary = ₹40,000 x 2.57 = ₹1,02,800
• Your new DA = 0% (as ₹18,400 has already been accounted for in the new basic salary)

Now whenever inflation increases in future, it will be calculated on your new and increased basic salary (₹ 1,02,800).