The Central Government has taken a major decision that will impact more than 50 lakh employees and 65 lakh pensioners. The Dearness Allowance (DA) has now officially been merged with the basic pay. While this move brings many benefits, there is also a sense of disappointment as the fitment factor remains unchanged at 2.57, despite expectations of a hike.
Here’s a simple explanation of what this change means, why it matters, and what you should do next.
What is DA Merger and Why is it Important?
Dearness Allowance is given to government employees and pensioners to help them manage the impact of rising prices and inflation. When the DA is merged with the basic salary, the overall pay structure becomes stronger and more stable.
Benefits of the DA merger:
Simplifies salary structure for easy understanding and calculation
Standardizes payments across departments and services
Prepares the base for the 8th Pay Commission and future salary hikes
This move changes the base pay level, which will now include DA, making all future increments more beneficial.
Understanding the Fitment Factor
The fitment factor is a number used to calculate the revised basic pay from the old one. It multiplies the old basic salary to give the new pay under a revised structure.
Current fitment factor: 2.57
Employees were expecting: Between 3.00 to 3.68
Final government decision: No change; remains at 2.57
Even though the DA is merged, the unchanged fitment factor means the overall increase in salary is lower than expected. Many employees hoped for a larger jump in basic pay, which did not happen.
Who Will Be Affected?
This change will impact a large number of government workers and pensioners, including:
Central Government employees
Pensioners
Defence personnel
Employees of autonomous bodies under the Central Government
For all of these groups, the merger will bring some benefits, even without an increase in the fitment factor.
Benefits of DA Merger Even Without Fitment Factor Hike
While the unchanged fitment factor may seem like a setback, there are still several key advantages of the DA merger:
Increased House Rent Allowance (HRA) – Since HRA is calculated based on basic pay, this will automatically rise.
Higher Gratuity and Pension – Pension calculations will now be based on a revised, higher basic pay.
Increased Provident Fund (PF) and NPS contributions – Contributions to these savings schemes will be higher, helping in long-term financial planning.
Better tax planning – The new salary structure might affect your income tax slab, which may help in re-evaluating your tax savings options.
Comparison: With vs Without Fitment Factor Hike
| Particulars | With Hike in Fitment Factor | Without Hike (Actual Situation) |
|---|---|---|
| Basic Pay | Higher | Moderate |
| DA (%) | Reduced after merger | Reduced after merger |
| Net Salary | Significantly higher | Slight increase |
| Allowances | More | Still increased |
| Pension | Higher base | Moderate increase |
| Tax Impact | More likely | Less likely |
| Government Expense | Very high | Balanced |
Why the Government Did Not Increase the Fitment Factor
The government has clearly explained why it decided not to raise the fitment factor:
High financial burden on the central budget
Inflation control – Avoiding too much money in circulation
Already high salary and pension expenses
Future impact of the upcoming 8th Pay Commission
So, while merging DA is a step towards fairness and simplification, the government is being cautious about increasing spending too much right now.
Employees’ Expectations vs Government’s Decision
| Aspect | What Employees Wanted | What Government Decided |
|---|---|---|
| DA Merger | Yes | Approved |
| Fitment Factor | Increase to 3.00–3.68 | No change – remains 2.57 |
| 8th Pay Commission | Early implementation | No update yet |
| Minimum Basic Salary | ₹26,000 | No change |
| Arrears | Expected | Not applicable |
What Should Employees and Pensioners Do Now?
While waiting for future decisions such as the 8th Pay Commission, here are a few things you can do now:
Check your new salary slip – Confirm changes in basic pay and updated allowances
Review HRA, TA, and CEA – These will increase, so note the new figures
Recalculate your income tax – With the new salary, your tax slab might change
Pensioners should check revised pension – This will be based on the new pay
Stay updated – Keep track of future announcements regarding the 8th Pay Commission
Summary Table: Key Effects of DA Merger
| Criteria | Post-Merger Status |
|---|---|
| DA Merged with Basic Pay | Yes |
| Fitment Factor | Unchanged at 2.57 |
| Minimum Basic Pay | No change |
| Allowances | Likely to increase |
| Net Salary | Slight increase |
| Pension | Based on revised basic pay |
| 8th Pay Commission | No official update yet |
Conclusion
The merger of Dearness Allowance with basic pay is an important step that benefits all Central Government employees and pensioners. It simplifies the pay structure and offers better benefits in allowances and pensions. However, the lack of an increase in the fitment factor has been a disappointment for many.
Still, this move lays the foundation for future salary revisions, possibly in the upcoming 8th Pay Commission. For now, employees can take this as a positive step and adjust their financial planning to make the most of the revised salary structure.