New Delhi: In a significant relief for central government employees nearing retirement, the Department of Personnel and Training (DoPT) has issued a fresh directive that could result in a higher pension payout for many. As per the new policy, employees who retire on June 30 or December 31 will now receive the benefit of a notional increment—a move that will positively impact pension calculations.
This development is being seen as a long-awaited correction, especially for employees who missed out on their final annual increment by just a day. Here’s a detailed breakdown of what this new update means for government retirees.
🧾 What Is the Notional Increment Policy?
Previously, employees who retired one day before the annual increment dates—July 1 and January 1—were not eligible for that year's salary increment. This seemingly minor timing issue had a major impact on pension amounts.
Now, with the latest decision, employees retiring on June 30 or December 31 will be granted a notional pay hike, strictly for the purpose of calculating their pension. However, it's important to note that this benefit will not extend to gratuity or other retirement payouts.
📅 Why This Change Matters
Under the 7th Pay Commission’s recommendations, salary increments and Dearness Allowance (DA) revisions occur twice a year, typically taking effect on January 1 and July 1. However, official announcements are usually made a few months later, in March and October/November.
This delay has historically excluded employees who retire just a day before the increment date—despite completing a full year of service. The new policy ensures such employees no longer lose out on their rightful pension hike.
⚖️ Legal Backing Behind the Move
The issue of notional increment has been contested in courts for years. A landmark 2017 judgment by the Madras High Court ruled in favor of a government employee, declaring that one day's shortfall should not deny them the annual increment.
The Supreme Court of India later reinforced this principle in 2023 and again in 2024, stating that if an employee has worked diligently throughout the year, they deserve the increment—even on the last day of service.
✅ Eligibility Criteria for the Notional Increment Benefit
While this is a welcome change, the DoPT has outlined specific conditions for eligibility:
The employee must retire on either June 30 or December 31.
Their service record must be complete and satisfactory.
The increment will only be considered for pension computation, not for other benefits like gratuity.
This decision was made after consultations with both the Department of Expenditure and the Department of Legal Affairs. A joint statement from the DoPT confirmed:
"Employees who meet the qualifying service requirements and retire on June 30 or December 31 will be eligible for notional increment, effective July 1 or January 1 respectively, solely for pension purposes."
🔍 Salary Increment Policy Timeline
Here's a brief timeline of how increment rules have evolved:
Before 2006: Increment dates varied based on individual appointments.
Post-2006: A unified increment system was introduced with July 1 as the fixed date.
Since 2016: Two uniform increment dates—January 1 and July 1—are in place for all central government employees.
Despite this system, retirees just before these dates were missing out until this recent policy correction.
📌 Final Thoughts
This progressive move by the DoPT is expected to benefit thousands of retiring central government employees each year. By ensuring that employees receive their rightful pension amount—even if they retire just before an increment date—the government has acknowledged the value of complete and dedicated service.
For government personnel planning to retire around these key dates, this is a crucial financial boost that could significantly impact their post-retirement income.
