What is Aykroyd formula

7th Pay Commission latest news: Amid government being fully committed to implement performance-based salary revision of the central government employees, people are busy calculating how their basic salary, Dearness Allowance (DA), Housing Rent Allowance (HRA) and other allowances will be decided. They are also not sure about how salary restructuring of will be done. For their knowledge, Aykroyd formula can be an option that the centre may adopt. In fact, in the 7th Pay Commission, this formula was used but not entirely. It was used for calculating inflation only. Now, when the Government has announced to implement performance-based salary restructuring, it may use this formula entirely as it has that capacity to calculate that as well.

The Aykroyd formula is named after Wallace Ruddell Aykroyd — first director of the Department of Nutrition at FAO. This formula has the capacity to address changes in the prices of commodities that are essential to the common man and are likely to impact them in future. According to this Aykroyd formula, considering other significant factors and variables, the minimum monthly pay for a central government employee would be around Rs 18,000 that has been implemented in the 7th Pay Commission.

This Aykroyd formula fits well in the 7th CPC Pay Matrix. As per the Akroyd formula, the minimum pay calculated forms the starting point of the pay matrix. The ‘horizontal range’ of the pay matrix level corresponds to a ‘functional role in the hierarchy’. Therefore, as the employees climb the hierarchy, they move from one level to the other. The ‘vertical range’ for each level represents the ‘pay progression’ within that level and the employee will move vertically within each level as per the yearly financial progression of three percent.

As per the Central Government rules, there is a fixed amount of monthly salary to be paid to any of the central government employees which is called basic salary. It is decided on the basis of one’s grade pay and level of employment. Once the basic salary is calculated, other allowances like Dearness Allowance (DA), Travel Allowance (TA), Housing Rent Allowance (HRA), etc. are decided as they are in percentage terms of the basic salary.

As per the central Government norms, the center decides only the basic salary of its employees as per the recommendation of the latest pay commission’s report. On the basis of this CPC recommendation, various allowances of the central government employees are decided for the next 10 years. Currently, as per the 7th CPC, minimum basic salary is decided at Rs 18,000 per month while for the Grade ‘A’ basic salary is fixed at Rs 56,100 per month. For Group ‘C’ employees the basis salary is Rs 35,400 per month.

The Seventh Pay Commission recommended increasing the gratuity ceiling from Rs 10 lakh to Rs 20 lakh that the central government had no problem in accepting. Additionally, the 7th Pay Commission had recommended the central government to increase the ceiling on gratuity by 25 per cent whenever the Dearness Allowance (DA) rises by 50 per cent, which the Centre also accepted.

If a central government employee has a higher basic salary then tax liability will go up as the basic salary is a taxable part of an earning individual. However, due to the higher basic salary one’s PF, Gratuity deduction will be higher that leads to higher returns at the time of retirement.