A pay scale (also known as a salary structure) is a system that determines how much an employee is to be paid as a wage or salary, based on one or more factors such as the employee’s level, rank or status within the employer’s organization, the length of time that the employee has been employed, and the difficulty of the specific work performed. Private employers use salary structures with grades (including minimums, midpoints and maximums) to define the ranges of pay available to employees in each grade/range. Let us understand Pay Scale in detail.
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How do Pay Scales work?
Pay scales are important business planning tools for companies to create new positions when the budget allows, while also providing a standard of transparency where employees know their value and join a company with clear wage expectations.
Although any company within any industry can establish pay scales, they are most often used within the public sector for consistency. Implementing a pay scale replaces the traditional salary negotiation and can provide a road map for new employees to see their earning potential within the company while holding the same position. Employees benefit from knowing what to expect in terms of growth and compensation within a given company and can plan a future for their career path more effectively.
What affects Pay Scales?
Although many factors can influence where an employee places on a pay scale, companies and leadership often develop a set of standards to help in the fair assignment of compensation for new and existing employees to understand the hierarchy of the company and to have confidence that they are paid a reasonable wage. Some factors companies usually consider when creating a pay scale are:
The need for services and products within differing industries directly relates to the need for employees and their skills. For services that are in higher demand, services that require more education, or production that require greater skill, workers are paid more.
Experience in the field
The more time you have working within the same field, the more advanced your experience will be. Your value to a company increases because your skills can positively affect your productivity, and your expertise can serve to support less-experienced co-workers.
Level of responsibility
Experience and responsibility are often related. An entry-level position within a company will often have fewer responsibilities and will, therefore, fall lower on the pay scale. However, someone with 15 years of experience will have gained trust within the company and will likely hold a leadership role and shoulder more responsibility.
Sometimes education and training can account for any experience an individual lacks. Especially when entering a company or new industry, your educational background can help you qualify for a higher place on the pay scale as it establishes your expertise through study rather than on-the-job experience. Advanced educational degrees can help you gain upward mobility in an industry or within the same company and differentiate you from others within the same role.
Advanced training and certifications
Once you are in a position, taking part in training courses or earning advanced certifications will validate your skills and can show an employer your commitment to the industry and your job. Training and certifications can also qualify you for a higher role when you have no job experience, such as those entering the job market or transitioning careers.
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Examples of Pay Scales
The three basic types of salary structures used by businesses in determining employee earnings are:
- Broadband- The broadband pay scale format is the least common. It offers more flexibility in regard to pay range, which is the margin between the minimum and maximum base pay for a given job. It identifies the minimum amount you can expect to make and the maximum amount you can expect to earn for a given role within a company
- Traditional- The traditional structure offers businesses less freedom in determining an employee’s salary because it utilizes more pay grades. This method creates a more equitable method of determining salaries and provides more motivation for employees to stay with the same company.
- Market based- A market-based structure is determined by what other employers in an industry pay their employees. A market-based pay scale is the most popular one in recent years and is based on research evaluating what other companies are paying for the same position.
Difference between Basic Pay and Grade Pay
Suppose an employee’s basic pay is between Rs. 15,600- Rs. 36,900 and grade pay is Rs. 5.400.
This means that at any given time the basic pay will be fixed between this. In the starting year of joining it is Rs. 15,600 and after increment it becomes Rs. 16,230 and after next increment it becomes Rs. 18,800 and so on.
Now the grade pay is added to this basic pay and dearness allowance to make the gross salary. DA is different for every state government. Suppose it is Rs. 25,000
So, Monthly salary = basic pay + grade pay + DA = 15600+ 5400+25000 = Rs. 46,000.
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What is the current rate of DA, HRA, and TA?
Calculation of Minimum Gross Salary for Pay Level 6
Let us understand this with the help of an example. Suppose Mr. XYZ works in Bihar in an ABC company and has a basic salary of Rs. 35,400. Here are the other components of his salary:
- Basic Salary: Rs. 35,400
- Dearness Allowance: Rs. 6,018 (17% of Basic Pay)
- House Rent Allowance: Rs. 8,496 (24% / X Cities)
- Travelling Allowance: Rs. 4,212 (Level-6 / A1 Cities)
- Gross Salary: Rs. 54,126
- Deduction for NPS: Rs. 4,142
- In-Hand Salary / Net Salary: Rs. 49,984
Here is the Total Minimum Monthly Salary Calculation for 7th Pay Matrix Level 6 (Rs. 35,400 -Rs.1,12,400) (6th CPC Grade Pay Rs. 4,200)-
|Calculation of Minimum Gross Salary for Pay Level 6
|Level and GP
|Bihar (Other Cities)
|Rs. 6,018 (17% of Basic Pay)
|Rs. 2,832 (8% / Other Cities)
|Rs. 2,106 (Level-6 / Other Cities)
*Minimum salary of a person posted in ‘Y’ Cities and Other Places in the list of classification of cities and towns for the purpose of HRA and TA.
7th Pay Commission Pay Scale for Central Government Employees
Government employees directly coming under the purview of the 7th Pay Commission.
Pay scale for Defence Personnel
|Minimum grade pay for Defence Personnel
|Military service pay
Pay Scale for Central Government Employees
|Rs.29,900 to Rs.1,04,400 per month
|Rs.5,400 to Rs.16,200 per month
Pay scale for Probationary Officer
|Total monthly salary
Pay Scale for Commercial Clerks or Commercial Superintendent
|7th Pay Commision pay scale
|Rs.6,500 per month
|Rs.9,300 per month
|Rs. 6,500 to Rs.10,500 per month
|Rs.9,300 to Rs.34,800 per month
|Senior Commercial Clerk
|Rs.4,000 to Rs.6,000
|Rs.5,200 to Rs.20,200 per month
Judge Pay Scale under 7th Pay Commission
|Pay scale per month
|High Court Judge
|Rs.80,000 per month
|Supreme Court Judge
|Rs.90,000 per month
|Chief Justice of High Court
|Rs.90,000 per month
|Chief Justice of Supreme Court
|Rs.1 lakh per month
|Junior District Judge
|Rs.12,000 per month
|Senior District Judge
|Rs.21,000 per month
|Super Time Scale District Judge
|Rs.24,000 per month
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Frequently Asked Questions (FAQs)
How will I calculate my new pay?
According to the website of the 7th Pay Commission, one can compute their total salary/pay package by following the simple instructions given below:
- The Basic Pay amount along with your Pay Band with Grade Pay needs to be entered as a first step
- By following the 7th CPC recommendations, choose your transport allowance, city, and the percentage of your current House Rent Allowance
- In the final step, click on the ‘’Calculate’’ button. This in turn will give you a revised amount of your salary in compliance with the 7th Pay Commission. You will also get a revised HRA, conveyance allowance, Index level, and so on
What were the factors incorporated into the new pay matrix?
The common pay structure for entry-level employees, transparent pay structure, rationalisation of current grade pay structure and the enhancement in the frequency of the Modified Assured Career Progression are some of the factors incorporated in the new pay matrix.
How is the pay scale calculated?
The method to calculate your salary as per the 7th CPC is simple. The salaries are obtained by multiplying the existing basic pay by a factor of 2.57 and the figure so arrived will be added to all the applicable allowances such as Transport Allowance (TA), House Rent Allowance (HRA), Medical Allowance, etc.
What is the minimum hand salary for pay level 1?
The minimum monthly gross salary for pay matrix level 1 is Rs. 23,913 with 17% Dearness Allowance, 8% House Rent Allowance and Transport Allowance and the basic salary is Rs. 18,000.
What are the benefits of the new pay matrix?
The primary benefits of the new pay matrix are that the grade pay has been subsumed and the levels are rationalised. The employees of the Central Government can check the level of their pay and determine their current status along with determining their potential growth over the course of their career.