The federal government has increased the minimum gross monthly salary for government employees from Rs. 37,000 to Rs. 40,700.
In an office memorandum issued by the Ministry of Finance, it was stated that employees whose gross salary is less than the newly set limit of Rs. 40,700 will be paid the difference in the form of a “Special Allowance” to bring them up to that level.
The decision applies to all federal government civil employees, civilian employees paid from the defence budget, contingent staff, and contract employees on civil posts under basic pay scales with specified terms and conditions.
From July 1, 2026, until further orders, employees earning less than Rs. 40,700 will receive the Special Allowance. The allowance will be subject to income tax and will remain payable during all types of leave. Employees on Leave Preparatory to Retirement will also receive it.
However, the allowance will not be paid during Extraordinary Leave. It will not be counted for pension or gratuity calculations, and will not be included in house rent deduction calculations. Employees on deputation or posted abroad will not be entitled to it. Upon returning to Pakistan, they will receive the same rate and amount they would have received if not posted abroad.
The Ministry of Finance clarified that the additional expenditures for FY 2026-27 due to the increase in minimum wage and Special Allowance will have to be met by the respective ministries, divisions, and departments from within their existing budget allocations.
With this, the minimum gross monthly salary for federal government employees has now been set at Rs. 40,700. However, the additional amount will be paid as a Special Allowance and will not be counted as part of pensionable emoluments.
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