Minimum salary raised to Rs40,700 for civil employees

ISLAMABAD: The federal government has raised the minimum gross salary of its civil employees from Rs37, 000 to Rs40, 700 with effect from July 1, 2026, with employees drawing less than the revised threshold to receive the difference as a Special Allowance. The Finance Ministry, in an Office Memorandum, said the decision would apply to all civil employees of the Federal Government, civilians paid from Defence estimates, including contingent-paid staff, and contract employees against civil posts in Basic Pay Scales employed on standard terms and conditions. Under the revised arrangement, employees whose gross salary is below Rs40, 700 will be paid the difference as Special Allowance with effect from July 1, 2026, and until further orders. READ ALSO: GPF rates for government employees revised The ministry clarified that the Special Allowance would be subject to income tax and would remain admissible during leave and the entire period of leave preparatory to retirement (LPR), except during extraordinary leave. However, the allowance would not be treated as part of emoluments for calculating pension or gratuity, nor would it be considered for recovery of house rent. The Finance Ministry further stated that the Special Allowance would not be admissible to employees during their posting or deputation abroad. Employees returning to Pakistan after completion of their foreign posting or deputation would, however, become eligible for the allowance at the rate and amount that would have been admissible to them had they not been posted abroad. The government has also placed the financial responsibility for the increase on the respective ministries, divisions and departments. According to the memorandum, the additional expenditure on account of the revised minimum wage and Special Allowance will have to be accommodated from within the budgetary allocations for the financial year 2026-27. “No supplementary grants would be given on this account, ” the Finance Ministry categorically stated. The decision effectively provides a salary floor of Rs40, 700 for the affected federal government employees, but the benefit will be delivered through a Special Allowance rather than an increase in pensionable emoluments. Copyright Business Recorder, 2026

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