29/06/2016 4:39 PM IST | Updated 15/07/2016 8:27 AM IST

9 Things You Need To Know About The 7th Pay Commission

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NEW DELHI, INDIA - NOVEMBER 21: Arun Jaitley Finance Minister of India speakingat HT leadership Summit on November 21, 2014 in New Delhi, India. (Photo by Pradeep Gaur/Mint via Getty Images)

The Union Cabinet on Wednesday approved the recommendations of the 7th Pay Commission that will give a steep pay hike to over one crore government employees and pensioners. Finance Minister Arun Jaitley has called it a “historic rise” in salary and allowances. Here are nine facts you need to know:

1. Who benefits? The new pay rules are expected to benefit 50 lakh government employees and about 58 lakh pensioners. According to media reports, several senior government officials will see a higher salary than some Parliamentarians.

2. By how much? Salaries and allowances are expected to rise by 23.5 per cent as per the recommendations of the commission. Base pay is expected to rise by 15 per cent.

3. By when? Changes are expected to be effective January 1, 2016.

4. What’s the cost to the taxpayer? The increment is expected to cost the taxpayer an additional Rs. 1.02 lakh crore annually, or nearly 0.7 per cent of the GDP. The pay panel, had recommended a 14.27 per cent hike in basic pay at junior levels -- the lowest in 70 years.

5. Biggest increases: The entry-level pay has been recommended to be raised to Rs 18,000 per month, from the current Rs 7,000. The maximum pay drawn by the Cabinet Secretary, has been revised to Rs 2.5 lakh per month from the current Rs 90,000.

6. Key recommendations: The pay panel had recommended a 14.27 per cent hike in basic pay at junior levels -- the lowest in 70 years. The previous 6th Pay Commission had recommended a 20 per cent hike, which the government doubled while implementing it in 2008.

7. The panel: The panel was headed by Cabinet Secretary P K Sinha. It was set up to study the recommendations of the pay commission headed by Justice AK Mathur.

8. How does it benefit people other than government employees? The government expects the rise in government salaries could spur demand and drive more consumer spending in the economy.

9. More transparency: A new pay structure will be implemented to replace the current pay with a more transparent pay structure, which will replace the current system of pay bands and grade-based pay.

With agency inputs