Union Finance Minister Arun Jaitley announced on Wednesday that the recommendations of the 7th Pay Commission will be effective from January 1, 2016.
The recommendations, which were approved by the cabinet on Wednesday, is likely to see a higher increase in the basic pay by nearly 15% for over one crore government employees and pensioners.
"7th Pay Commission has an annual burden of Rs. one lakh two thousand crore, apart from which the arrears burden will likely increase by 12 thousand crore," said Jaitley.
"The minimum pay of govt. employees will increase to Rs. 18,000 from existing of Rs. 7,000," added Jaitley.
Adding to this, the minister said that the recommendations approved today will see a recurring burden of Rs.72,800 crore additionally.
The Implementation of new pay scales recommended by the 7th Pay Commission will impact the remuneration of nearly 50 lakh central government employees and 58 lakh pensioners.
One of the key changes suggested by the pay commission has been the 'New Pay Structure', under which the existing system of pay bands and grade pay will be ejected and a new pay matrix will be brought in to bring about more transparency.
The panel headed by Cabinet Secretary P K Sinha was set up to study the recommendations of the pay commission headed by Justice AK Mathur.
The key recommendations of the 7th Pay Commission is a 23.55% increase in salaries, allowances and pension of central government employees and pensioners, which is estimated to put an additional burden of Rs. 1.02 lakh crore on the exchequer annually or nearly 0.7% of GDP.