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The biggest demands of employees regarding the 8th Pay Commission relate to bonus, PF, and gratuity. Employee organizations say that the ceiling is now outdated. Demands are growing for removing or increasing the limits, given inflation, salary structure, and long service. The government has not yet made any decisions, but the demands are on record. The Confederation of Central Government Employees and Workers has submitted these demands to the Cabinet Secretary.

Why did the demand for removing the bonus, PF, and gratuity limits in the 8th Pay Commission arise?
Simple answer: Confederation Secretary General S.B. Yadav says that this is because the current rules do not fit today's salary and inflation. The limits that were appropriate 10-15 years ago no longer provide full benefits to employees.

What do the rules currently say?

Bonus

Central government employees typically receive a Productivity Linked Bonus (PLB) or an ad-hoc bonus.

The minimum salary limit for calculating bonuses is ₹7,000.

Annual bonuses are typically limited to around ₹7,000 x 30 days.

Problem: Even those with a high basic salary receive a bonus based on the same limit.

Provident Fund (PF)

PF contribution: 12% of Basic + DA (employee + government).

But the EPF Act limits basic salary to ₹15,000.

Contribution above this limit is voluntary.

Problem: PF contributions for those with high salaries are insufficient for retirement.

Gratuity

Current maximum limit: ₹20 lakh
Eligibility: At least 5 years of service
Formula: (Last Drawn Salary × 15 × Years of Service) / 26
Problem: Despite long service and high salaries, the ₹20 lakh limit is quickly reached.

What are employee organizations demanding?
1. Remove all ceilings on bonuses.

Bonuses should be linked to actual salary.

The minimum wage or fixed amount requirement should be eliminated.

2. Include the entire salary in PF.

Remove the basic salary limit of ₹15,000.

The entire Basic salary plus DA should be mandatorily credited to PF.

3. Increase the gratuity limit.

The ₹20 lakh limit should be increased to either ₹30-40 lakh.

Or make the limit completely limit-free.

Why did the government impose these limits previously?
There were three major reasons:

To control government expenditure

A uniform structure for all employees

Balance in retirement benefits

But now the salary structure has changed.

Why is the change considered necessary now?
DA has reached above 50%.
Salary multiples have increased.
Employees are serving longer.
PF and gratuity are more flexible in the private sector.
Old formulas no longer match today's reality.

If you are a central government employee, what does this mean for you?

PF limit removed - larger retirement corpus.
Gratuity increased - more cash at retirement.
Bonus changed - better cash flow each year.
If you are planning for retirement...
The financial value of a government job will increase.
Post-retirement dependence will decrease.

Can these changes in the 8th Pay Commission be implemented immediately?
The reality is: these are demands; the government has not given any official approval. However, the previous (7th CPC) gratuity was also increased to ₹10 lakh - ₹20 lakh. Therefore, the expectation cannot be completely dismissed.

Who benefits, who loses?

Advantages

Employees with long service
Higher-grade officers
Employees nearing retirement

Disadvantages

The fiscal burden will increase.
But employee satisfaction and stability will also increase.

What could happen next?
A possible way forward is to adopt a phased approach instead of removing all limits at once. First, increase gratuity, then revise the PF limit, and partially change the bonus formula.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.

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