Notional pay fixation

Notional pay fixation deems pay fixed at a higher stage from a back date for pension, seniority and increments, without arrears for the notional period.

Notional pay fixation is the fixing of an employee’s or a pensioner’s pay on paper, at a higher stage or in a revised scale, from an earlier date, without the money for that back period being paid. The higher figure is deemed to exist for one limited purpose: computing a later entitlement, most often a pension, the date of an increment, seniority or a terminal benefit.

It stands against actual, or monetary, fixation, where the pay is drawn and the arrears from the effective date are paid in cash. The device exists to separate the computation of a benefit from the cash outflow on it, and the government reaches for it whenever a benefit is due from a back date but paying for the whole intervening period is either unaffordable or, on the record available, impossible to compute.

The largest single application is the pension of everyone who retired before 1 January 2016. Their pension was rebuilt on a notional 7th CPC pay they never drew, under Department of Pension and Pensioners’ Welfare Office Memorandum No. 38/37/2016-P&PW(A) dated 12 May 2017, at an additional cost of about Rs. 5,031 crore in 2016-17 across more than 55 lakh pensioners. Beyond pension, the same device appears in court-ordered relief, in review promotion cases, in the increment restored after a minor penalty, and in the one increment given to a 30 June retiree.

Reading which benefit an order actually grants is the whole difficulty. An order that fixes pay notionally from 1997 and pays arrears from 2023 is doing two different things in one sentence, and mistaking the first for the second is the most common error in the field.

Notional fixation compared with actual fixation

The difference between the two is whether money changes hands for the past. Actual, or monetary, fixation means the pay is really drawn from the effective date, and the arrears for the period from that date are paid in cash; this is the ordinary pay fixation an employee gets on promotion or on a pay commission revision. Notional fixation means the pay is only deemed to have been fixed, for the purpose of a later calculation, and nothing is paid for the notional period.

A great many orders combine the two. Pay is fixed notionally from an earlier date, so that pension, seniority and the date of next increment are worked out on the higher figure, while the money runs only from a later cut-off date set by the order or the court. The notional part governs the arithmetic; the cut-off governs the cheque.

The practical test on any order is short. Identify the date from which pay is deemed fixed, identify the date from which payment runs, and then ask what the notional figure has been made to feed: a pension, a place in a seniority list, an increment date, or nothing at all beyond the record.

Pension of pre-2016 pensioners

Notional pay fixation is how the pension of every pre-2016 central civil pensioner was revised under the 7th CPC. The pay drawn at retirement is carried forward through each intervening pay commission, using the fixation rules of each, until it reaches a cell of the pay matrix; the revised pension is 50% of that notional pay and the family pension 30%, with effect from 1 January 2016. The pensioner never drew the figure and never will.

The method in force is not the method the Commission recommended. Paragraph 10.1.67 of the report offered two formulations and gave the pensioner whichever was more favourable. The first was notional parity: fix the retiree at the minimum of the corresponding level of the new matrix on the basis of the pay band and grade pay held at retirement, raise it by the number of increments actually earned in that level at 3% each, and take 50% of the result. The second was the pension as fixed at 6th CPC implementation multiplied by the fitment factor of 2.57.

The Commission expected the first to take time and at paragraph 10.1.68 recommended paying the second as an interim measure. That is what happened: the 2.57 multiple was notified by Office Memorandum No. 38/37/2016-P&PW(A)(ii) dated 4 August 2016.

The first formulation was then abandoned outright. A committee under the Secretary (Pension) found it not implementable, and the Cabinet recorded on 3 May 2017 that it “was not found to be feasible to implement on account of non-availability of records in a large number of cases and was also found to be prone to several anomalies”. The increment history of a pensioner who retired decades earlier frequently no longer existed. What replaced it was a modified formulation that avoids the increment count altogether and reconstructs the pay from the data already recorded in the Pension Payment Order. The Cabinet described the substitute as more scientific, implementable in every case, and beneficial to more pensioners than the formulation the Commission had itself recommended.

The method notified on 12 May 2017

Office Memorandum No. 38/37/2016-P&PW(A) dated 12 May 2017 carries the working method. Notional pay as on 1 January 2016 is built by stepping the retiree’s pay through the 4th, 5th and 6th Central Pay Commission fixation rules in turn, so that a person who retired in the 1980s passes through three conversions before landing on a matrix cell. Pension is then 50% of that cell value and family pension 30%.

Paragraph 5 gives the pensioner the higher of the two routes. The 2.57 figure already being paid under the 4 August 2016 order is compared with 50% of the notional pay, and the larger governs; where the amount already paid is greater, it is treated as the revised pension from 1 January 2016 rather than being recovered. Applying one route alone, which happens when an office assumes the later order superseded the earlier one, under-fixes the pension.

Paragraph 17 bars arrears for any period before 1 January 2016 and requires that both the arrears and the revised pension already paid under the 4 August 2016 order be adjusted in computing what becomes due. The pensioner therefore receives the difference between the two formulations, not a second revised pension for the intervening years. In the first illustration annexed to the order the 2.57 route had already paid Rs. 10,771 a month against a notional-pay figure of Rs. 11,550, so the arrears represent Rs. 779 a month plus the dearness relief on it.

The concordance tables

Because stepping a pay figure through three commissions by hand is laborious, the Department issued 58 concordance tables by Office Memorandum of even number dated 6 July 2017, with the concurrence of the Department of Expenditure recorded at Diary No. 1(13)/EV/2017 dated 5 July 2017. A table gives the notional pay and the revised pension directly from the pay drawn at retirement, so a Head of Office does not re-run the chain for every case. Because a table always hands back an actual matrix cell, the index of rationalisation is built into the answer without the pensioner ever being multiplied by it.

A table does not outrank the rules. Paragraph 4 of the 6 July 2017 order provides that where a table is inconsistent with the relevant rules or instructions, the notional pay and pension are fixed under the rules applicable to fixation of pay in the intervening pay commission periods. That paragraph is not boilerplate: a corrigendum dated 13 September 2017 substituted Tables 51 and 52, correcting entries for pre-revised pay of Rs. 56,050 at 6th CPC grade pay of Rs. 10,000, and a corrigendum dated 18 June 2020 substituted Table 29, correcting entries for pre-revised pay of Rs. 21,820 at grade pay of Rs. 5,400. A revision run on a superseded table gives the wrong pension. For a pensioner who retired before 1 January 1986, paragraph 2 of the 6 July 2017 order enters the case at the notional pay as on 1 January 1986 rather than at the pay drawn at retirement.

Pensioners outside the notional-pay route

Four paragraphs of the 12 May 2017 order carve out classes of pensioner, and running an excluded case through a table produces a figure with no legal basis.

Excluded classParagraphWhat applies instead
Compulsory retirement pension under Rule 40, CCS (Pension) Rules11The 2.57 route of the 4 August 2016 order
Compassionate allowance under Rule 4111The 2.57 route of the 4 August 2016 order
Lump-sum absorbee drawing one-third restored pension12Deferred to separate orders
Armed forces pensioners19Ministry of Defence orders
Retired High Court and Supreme Court judges, other constitutional or statutory authorities20Their own governing rules

The reason for the first two is structural rather than administrative. Compulsory retirement pension and compassionate allowance are each a discretionary fraction of a full pension rather than a pension computed from a pay stage, so there is no pay figure for a table to carry forward. In the other direction, paragraph 19 confirms that the order does reach pensioners under the CCS (Pension) Rules, 1972 and the corresponding rules for railway pensioners and members of the All India Services, and covers a pensioner whose entitlement began on 1 January 2016 following retirement or death on 31 December 2015.

Arrears in service litigation

Where a wrong fixation is corrected by a court rather than by an order, the entitlement and the money are treated separately. The courts hold a wrong fixation to be a continuing wrong, so a belated claim is not shut out altogether, but they restrict the arrears to about three years preceding the writ petition and grant the balance of the relief only notionally. The rule comes from Union of India v. Tarsem Singh, (2008) 8 SCC 648, and rests on delay and laches under Article 226 of the Constitution rather than on any statute of limitation; the continuing-wrong principle itself was settled earlier in M.R. Gupta v. Union of India, (1995) 5 SCC 628.

The restriction is the general position and not an absolute one. Where the government’s own order fixes a different cut-off date for arrears, the courts have declined to confine the arrears to three years, and accrued arrears have been protected as property under Article 300A. The practical result is that a claimant with a genuine but old grievance secures a corrected pay for the future and for pension, and usually about three years of money, but not the whole backlog. Further detail sits in pension arrears.

This is why so many judgments read as though they grant a great deal and pay very little. The notional fixation from the distant date is the substantive relief, because it is what the pension is then computed on; the three-year window is the cash.

Notional promotion and review promotion committees

A departmental promotion committee that meets again for an earlier year produces notional relief by design. Where a review results in an officer being found fit at a time when juniors had already been promoted, the officer is promoted immediately, pay is fixed under Fundamental Rule 27 at the stage that would have been reached had the promotion been made on the date the immediate junior was promoted, but no arrears are admissible. Seniority follows the reviewed position in the select list, and the intervening period counts towards qualifying service for the next promotion.

For an officer who has since retired, the same route yields a notional promotion from the date of the immediate junior’s promotion in the reviewed panel, with notional pay fixation and refixation of pension, subject to four conditions: the immediate junior must have assumed charge of the higher post on or before the date of superannuation, the retired servant must have been clear from the vigilance angle on the date of that junior’s promotion, and the benefit is given only from the date the reviewed panel is approved.

Disciplinary history cuts the other way. Where an officer is promoted late because of a penalty, seniority is fixed at the position in the panel on the basis of which the promotion was made after the penalty expired, pay is fixed only from the date of actual promotion, and there is expressly no stepping up of pay. In Union of India v. K. V. Jankiraman, (1991) 4 SCC 109, the Supreme Court rejected the principle of no work no pay as inapplicable where an employee, although willing to work, was kept away from work by the authorities through no fault of the employee’s own. Where an ad hoc promotion had been made and the officer is acquitted on merits or fully exonerated, the ad hoc promotion converts into a regular promotion from its own date with all attendant benefits, together with due seniority and notional promotion if the officer would have been promoted earlier. Acquittal on a purely technical ground does not carry the same consequence.

The notional increment for a 30 June or 31 December retiree

An employee who retires on 30 June or 31 December retires one day before the annual increment falls due, and the pension is therefore computed on a pay that is one increment short of a full year’s service. The notional increment on superannuation fixes that, and it is a notional fixation of the narrowest kind.

DoPT Office Memorandum No. 19/116/2024-Pers.Pol.(Pay) dated 14 October 2024 grants one increment on 1 July or 1 January to a central government employee who retired on the day before it became due, having the requisite qualifying service with good conduct and efficiency, for the purpose of calculating pension only. It followed Civil Appeal No. 2471 of 2023, decided on 11 April 2023, in which the Supreme Court held such an employee entitled to one increment for pension. The Court gave final directions by order dated 20 February 2025, and DoPT Office Memorandum No. 19/116/2024-Pers.Pol.(Pay)(Pt) dated 20 May 2025 implements them.

The limits are what make it a clean illustration of the device. The increment counts only for pension, so retirement gratuity, commutation and leave encashment stay on the pay actually drawn. The benefit is available to those who retired on 30 June or 31 December on or after 1 January 2006. For an employee who did not litigate, the higher pension is payable only from 1 May 2023, with nothing for any earlier period. Where an employee had filed a petition or an intervention application, direction (d) of the order of 20 February 2025 allows the enhanced pension for three years prior to the month in which the application was filed, which is the same three-year pattern the courts apply to arrears generally.

Increments restored notionally after a minor penalty

The minor penalty of withholding of an increment under Rule 11(iv) of the CCS (Classification, Control and Appeal) Rules, 1965 turns on the same distinction, and here the notional element is what limits the punishment rather than what confers a benefit.

Where the penalty is imposed without cumulative effect, the increment due after the penalty date is withheld for the specified period and then restored at the end of that period on a notional basis, without arrears. The date of next increment is not disturbed and the normal 1 January or 1 July cycle continues unchanged, so the pay is correct going forward while the employee keeps the loss for the period of withholding. Where the penalty carries cumulative effect, the withheld increment is never restored and the loss runs for the rest of the career and into the pension.

Notional increments during deputation

An officer on deputation who has elected to draw the pay of the ex-cadre post does not thereby freeze in the parent cadre. Paragraph 7.5 of DoPT Office Memorandum No. DOPT-1711629234974 dated 28 March 2024, the consolidated guidelines on deputation and foreign service, keeps notional increments accruing in the post held on a regular basis in the parent cadre, so that pay on repatriation is regulated on the figure the officer would have reached had the deputation not intervened.

Note 2 under paragraph 5 applies the same logic to an ad hoc promotion. An officer holding a higher post on an ad hoc basis is treated as having vacated it on proceeding on deputation, so the officer proceeds from the regular post and earns notional increments in that regular post. In both cases the notional figure exists to protect the parent-cadre position, and it becomes real pay only on reversion.

Notional seniority does not carry notional pay

The most persistent misreading in this area is that notional seniority and notional pay fixation travel together. They do not. A person may be granted notional seniority from an earlier date without any notional fixation of pay, and a grant of notional seniority does not by itself carry a notional fixation of pay from the date of that seniority. Equally, a notional pay fixation may be granted without arrears and without any change in seniority.

What is granted, whether notional seniority, notional pay, arrears or some combination, turns entirely on the words of the order or the judgment. An order that says an officer “shall be deemed to have been promoted with effect from 1 April 2015 for the purpose of seniority” has granted one thing; an order that adds “and pay shall be fixed notionally from that date” has granted a second; and an order that adds “with arrears from 1 April 2015” has granted a third that the first two did not.

What a notional fixation does not do

A notional pay is not pay drawn, and nothing follows from it automatically. No allowance computed as a percentage of basic pay is payable on it for the notional period, so a notional fixation produces no dearness allowance, no house rent allowance and no transport allowance for that time. In the pension revision the notional pay is an input to a formula and never a salary figure; dearness relief is added afterwards, on the revised basic pension.

Terminal benefits do not follow either unless the order says so. The notional increment for a 30 June retiree is the documented case: the Supreme Court’s directions and both DoPT orders confine it to the calculation of pension and leave retirement gratuity, commutation and leave encashment on the pay actually drawn. The same reading applies to a court-ordered notional fixation that is silent on the point.

For a serving employee a notional fixation still has value, because the deemed figure feeds the date of next increment, stepping-up comparisons, and above all the pension, which is computed on the pay at retirement. For a pensioner, the notional-pay method is the basis of the revised pension itself. What it almost never does is pay for the past, and an employee or pensioner should read any such order to see precisely which benefit it confers and from which date the money, if any, actually runs.

Frequently Asked Questions (FAQs)

What is notional pay fixation?
Notional pay fixation is the fixing of an employee’s or pensioner’s pay on paper, at a higher stage or in a revised scale, from an earlier date, without paying the money for that back period. The higher pay is deemed to exist for the limited purpose of working out a later entitlement such as pension, seniority, the date of next increment or a terminal benefit. It is contrasted with actual or monetary fixation, where the pay is drawn and arrears are paid for the period from the effective date.
What is the difference between notional and actual pay fixation?
Actual, or monetary, fixation means the pay is really drawn and any arrears for the past period are paid in cash. Notional fixation means the pay is only deemed to have been fixed for calculation purposes, and no arrears are paid for the notional period. A common pattern combines the two: pay is fixed notionally from an earlier date so that pension and increments are worked out on the higher figure, while the money flows only from a later cut-off date fixed by the order or the court.
How is notional pay used to revise the pension of pre-2016 pensioners?
The pension of a person who retired before 1 January 2016 is revised by building a notional pay as on 1 January 2016: the pay drawn at retirement is carried forward through each intervening pay commission using the fixation rules of each, from the data already recorded in the Pension Payment Order, until it lands on a cell of the 7th CPC pay matrix. The revised pension is 50% of that notional pay and the family pension 30%, with effect from 1 January 2016. The method is notified by Department of Pension and Pensioners’ Welfare Office Memorandum No. 38/37/2016-P&PW(A) dated 12 May 2017.
Did the 7th Central Pay Commission recommend the notional pay method?
No. Paragraph 10.1.67 of the report offered two formulations, the first being notional parity built by counting the increments actually earned in the level at 3% each. A committee under the Secretary (Pension) found that formulation unworkable, and the Cabinet recorded on 3 May 2017 that it was not found to be feasible to implement on account of non-availability of records in a large number of cases and was also found to be prone to several anomalies. What the Office Memorandum of 12 May 2017 notified is a modified method that avoids the increment count and steps the pay forward through each pay commission instead.
Does a pensioner get the 2.57 route or the notional pay route?
Whichever produces more. Paragraph 5 of the Office Memorandum dated 12 May 2017 gives the pensioner the higher of the two figures, and where the amount already paid under the earlier route is greater, that amount is treated as the revised pension from 1 January 2016. The first route multiplies the pre-revised basic pension by 2.57 and was notified by Office Memorandum No. 38/37/2016-P&PW(A)(ii) dated 4 August 2016. The second is the notional-pay route. Applying only one of them can under-fix the pension.
Are arrears paid on notional pay fixation?
Not for the notional period. In the pension revision, paragraph 17 of the Office Memorandum dated 12 May 2017 bars arrears for any period before 1 January 2016 and requires that the arrears and the revised pension already paid under the 4 August 2016 order be adjusted against what becomes due, so the pensioner receives the gap between the two formulations rather than a fresh revised pension for the intervening years. In service litigation, arrears are usually restricted to about three years before the claim and the rest of the relief is granted notionally.
Do concordance tables give the notional pay, and are they final?
The 58 concordance tables issued by Office Memorandum No. 38/37/2016-P&PW(A) dated 6 July 2017 give the notional pay and the revised pension directly from the pay drawn at retirement, so the sanctioning authority does not have to re-run the fixation chain by hand. They are not final over the rules. Paragraph 4 of that order provides that where a table is inconsistent with the relevant rules, the notional pay is fixed under the fixation rules of the intervening pay commission periods. A corrigendum dated 13 September 2017 substituted Tables 51 and 52 and one dated 18 June 2020 substituted Table 29, so the tables demonstrably carried errors.
Which pensioners are outside the notional pay route?
Paragraph 11 of the Office Memorandum dated 12 May 2017 keeps compulsory retirement pension under Rule 40 and compassionate allowance under Rule 41 of the CCS (Pension) Rules on the 2.57 route of the 4 August 2016 order, because each is a discretionary fraction of a full pension rather than a pension computed from a pay stage. Paragraph 20 excludes retired High Court and Supreme Court judges and other constitutional or statutory authorities. Paragraph 19 leaves armed forces pensioners to the Ministry of Defence. Paragraph 12 defers a pensioner who took a lump sum on absorption in a public sector undertaking and now draws a one-third restored pension to separate orders.
How long can arrears run in a court case about wrong pay fixation?
About three years before the writ petition. In Union of India v. Tarsem Singh, (2008) 8 SCC 648, the Supreme Court treated a wrong fixation as a continuing wrong, so a belated claim is not shut out altogether, but restricted the arrears to roughly three years preceding the petition and left the rest of the relief notional. The restriction rests on delay and laches under Article 226 of the Constitution rather than on a statute of limitation, and it is not absolute: where the government’s own order fixes a different cut-off, the courts have declined to confine the arrears to three years.
Does notional seniority mean notional pay fixation?
No. The two are separate. A person may be granted notional seniority from an earlier date without any notional fixation of pay, and the grant of notional seniority does not by itself carry a notional fixation of pay from the date of that seniority. Whether pay is also fixed notionally, and whether any money follows, depends on the terms of the order or judgment, which must be read to see exactly what is granted and from which date the payment runs.
Is the notional increment for a 30 June retiree a notional fixation?
Yes, and a narrow one. DoPT Office Memorandum No. 19/116/2024-Pers.Pol.(Pay) dated 14 October 2024 grants one increment on 1 July or 1 January to an employee who retired on the day before it fell due, and it is reckoned only for calculating pension. Retirement gratuity, commutation and leave encashment stay on the pay actually drawn. For an employee who did not litigate, the higher pension is payable from 1 May 2023 and no earlier, under the Supreme Court’s directions of 20 February 2025.
Does an increment restored after a minor penalty carry arrears?
No. Where withholding of an increment is imposed under Rule 11(iv) of the CCS (Classification, Control and Appeal) Rules, 1965 without cumulative effect, the increment is restored at the end of the specified period on a notional basis only. The employee receives no back pay for the period of withholding, the date of next increment is not disturbed, and the normal 1 January or 1 July increment cycle continues unchanged.
Does notional pay attract dearness allowance or house rent allowance?
No. A notional pay is not pay drawn, so no allowance computed as a percentage of basic pay is payable on it for the notional period. In the pension revision the notional pay is an input to the pension formula and never a salary figure, and dearness relief is added afterwards on the revised basic pension. Where an order grants a notional fixation alone, nothing follows automatically for allowances, gratuity or commutation unless the order says so.
What happens when a review departmental promotion committee finds a retired officer fit?
The review committee route yields a notional promotion from the date the immediate junior in the reviewed panel was promoted, with notional pay fixation and refixation of pension, subject to four conditions including that the immediate junior assumed charge of the higher post on or before the date of superannuation and that the retired servant was clear from the vigilance angle on the date of that junior’s promotion. For a serving officer found fit, pay is fixed under Fundamental Rule 27 at the stage that would have been reached, but no arrears are admissible.

External references

References

  1. Department of Pension and Pensioners’ Welfare, Office Memorandum No. 38/37/2016-P&PW(A)(ii) dated 4 August 2016: revision of pension of pre-2016 pensioners and family pensioners by multiplying the pre-revised basic pension as on 31 December 2015 by 2.57.
  2. Department of Pension and Pensioners’ Welfare, Office Memorandum No. 38/37/2016-P&PW(A) dated 12 May 2017: revision of pension of pre-2016 central civil pensioners with effect from 1 January 2016 by notionally fixing pay in the 7th CPC pay matrix, pension at 50% and family pension at 30% of the notional pay; paragraph 5 (higher of the two formulations), paragraph 11 (Rule 40 and Rule 41 exclusions), paragraph 12 (absorbees), paragraph 17 (no arrears before 1 January 2016), paragraph 19 (scope and armed forces) and paragraph 20 (judges and other authorities).
  3. Department of Pension and Pensioners’ Welfare, Office Memorandum No. 38/37/2016-P&PW(A) dated 6 July 2017: Concordance Tables Nos. 1 to 58, issued with the concurrence of the Department of Expenditure at Diary No. 1(13)/EV/2017 dated 5 July 2017; paragraph 2 (pre-1986 retirees) and paragraph 4 (fixation rules prevail over a table). Corrigenda dated 13 September 2017 (Tables 51 and 52) and 18 June 2020 (Table 29).
  4. Seventh Central Pay Commission report, paragraphs 10.1.67 and 10.1.68, setting out the two formulations for pre-2016 pensioners; Cabinet decision of 3 May 2017 recording that the first formulation was not found feasible to implement.
  5. Central Civil Services (Revised Pay) Rules, 2016, notified as G.S.R. 721(E) on 25 July 2016, and the fitment tables of the Department of Expenditure, under which pay is fixed, actually or notionally, in the pay matrix.
  6. Union of India v. Tarsem Singh, (2008) 8 SCC 648, restricting arrears on a belated claim to about three years preceding the writ petition; M.R. Gupta v. Union of India, (1995) 5 SCC 628, on the continuing wrong and the right to correct fixation prospectively.
  7. Union of India v. K. V. Jankiraman, (1991) 4 SCC 109, on sealed-cover proceedings, arrears on delayed promotion and the inapplicability of no work no pay where the employee was kept away from work by the authorities.
  8. Department of Personnel and Training, Office Memorandum No. 19/116/2024-Pers.Pol.(Pay) dated 14 October 2024, granting one notional increment for the purpose of pension to an employee retiring on 30 June or 31 December, and Office Memorandum No. 19/116/2024-Pers.Pol.(Pay)(Pt) dated 20 May 2025 implementing the Supreme Court’s directions of 20 February 2025 in Civil Appeal No. 2471 of 2023.
  9. Central Civil Services (Classification, Control and Appeal) Rules, 1965, Rule 11(iv), under which an increment withheld without cumulative effect is restored notionally at the end of the specified period without arrears.
  10. Department of Personnel and Training, Office Memorandum No. DOPT-1711629234974 dated 28 March 2024, consolidated guidelines on deputation and foreign service, paragraph 5 Note 2 and paragraph 7.5 on notional increments accruing in the parent cadre post.