ISLAMABAD – Thousands of federal government employees are set to get salary boost as the government raises minimum gross monthly pay to Rs40,700, with the difference paid as a special allowance.
Under the new arrangement, employees drawing less than Rs40,700 will receive the shortfall as a special allowance, ensuring their gross salary reaches the newly fixed minimum limit.
Ministry of Finance issued office memorandum outlining the scope of the decision, which covers all federal civil employees, civilians paid from the defence budget, contingent-paid staff and contractual employees working against civil posts under Basic Pay Scale terms and conditions.
The special allowance will be paid from July 1, 2026, until further orders, but the government has attached several conditions to the benefit. The allowance will be subject to income tax and will remain payable during ordinary leave as well as Leave Preparatory to Retirement (LPR). However, employees on extraordinary leave will not receive the allowance.
The government also made it clear that the additional payment will not count as a pensionable emolument and will therefore not be included in calculations for pension or gratuity. It will also be excluded from the calculation of house rent recovery.
Federal employees serving abroad or on deputation will not be entitled to the special allowance during that period.
However, once employees complete their foreign posting or deputation and return to Pakistan, they will again receive the allowance at the same rate and amount they would have been entitled to had they remained in Pakistan.
The salary decision will also create an additional financial burden for government departments. Ministry of Finance has directed the relevant ministries, divisions and departments to meet the additional expenditure arising from the higher minimum salary and special allowance during fiscal year 2026-27 from their existing budget allocations.
Officials said no supplementary grant will be issued to cover the additional expense. The move effectively sets Rs40,700 as the minimum gross monthly salary for affected federal government employees, although the increase will be delivered through a special allowance rather than being incorporated into pensionable pay.
Income Tax Calculator 2026–27: Check Your New Salary Tax after Budget
