Decision of the government
1. The government announced an overall increase of 23.5 per cent for over one crore government employees and pensioners in line with the Seventh Pay Commission’s recommendations. 

2. The hikes will come with the August paychecks and be paid with effect from January 1, 2016. The arrears for the six months will be disbursed during the current financial year (2016-17) itself.

3. Increase of 16% in pay and 24 per cent in pensions.
4. The starting salary for new recruits at the lowest level has been raised to Rs. 18,000 from Rs. 7,000 per month. Freshly recruited Class I officers will receive Rs. 56,100. This reflects a compression ratio of 1:3.12 signifying that the pay of a Class I officer on direct recruitment will be three times the pay of an entrant at the lowest level.

5. The approved maximum pay, drawn by the Cabinet Secretary, is Rs. 2.5 lakh per month (against the current Rs. 90,000), higher than the salaries drawn by MPs.

6. Nod for new pay matrix:The Union Cabinet dispensed with the present system of pay bands and grade pay and okayed a new pay matrix as recommended by the Pay Commission.
Employee status, hitherto determined by grade pay, will now be determined by the level in the pay matrix. Separate pay matrices have been drawn up for civilians, defence personnel and for Military Nursing Service with all existing levels subsumed in the new structure; no new levels have been introduced nor has any level been dispensed with.

7. The Cabinet also approved the recommendation of the commission to enhance the ceiling of house building advance from Rs. 7.5 lakh to Rs. 25 lakh. All but four interest-free advances have been abolished

The decision of the government has been taken on the recommendations of 7th Pay Commission headed by Justice A.K. Mathur.