In the 2025–26 budget speech delivered on June 10, 2025, the Government of Pakistan announced a significant relief package for federal employees in BPS‑1 through BPS‑22. The centerpiece of this package is the implementation of two allowances aimed at boosting earnings by up to 40%, effective from July 1, 2025
1. Ad hoc Relief Allowance (ARA‑2025) – 10%
A flat 10% Ad hoc Relief Allowance (ARA‑2025) is being applied to the current basic pay of all employees in BPS‑1 through BPS‑22. This uplift addresses inflationary pressures and aligns with pension increases often mirrored through OAGPR adjustments
2. Disparity Reduction Allowance (DRA‑2025)
To correct historical pay imbalances, a Disparity Reduction Allowance (DRA‑2025) is also being granted:
Eligible employees—those without 100%+ special allowances—stand to receive the full benefit. Total possible increase: 40% for BPS‑1 to 16, and 25% for BPS‑17 to 22
3. Who Qualifies for DRA‑2025?
- Employees in all grades from BPS‑1 to BPS‑22 are eligible for the 10% ARA‑2025.
- DRA‑2025 targets employees not receiving high special allowances. Those with allowances of 100% or above won’t receive DRA, but will still receive ARA
4. Effective Date & Implementation
Both ARA‑2025 and DRA‑2025 are applied retroactively from July 1, 2025, with the Finance Division expected to issue a detailed SRO or notification to guide disbursal and tax treatment. Pensioners will also see a 7% pension increase from the same date
5. Pay Scale Revision
As of now, no complete rewrite of pay scale tables (like merging ARA into basic pay) has been officially confirmed. Current scales still reflect the 2022 Pay Scales. However, discussions are underway to possibly revise the basic scale structure later
7. Broader Implications
- Tax relief: Budget discussions include tax adjustments—e.g., reduced rates for salaried individuals—to enhance net income.
- Non‑salary allowances—such as house rent, medical, and conveyance allowances—have not yet been publicly revised.
- Potential restructuring: A civil‑service reform committee is considering adding BPS‑23 and BPS‑24, merging allowances and realigning job classifications by workload
Summary Table
| BPS Grades | ARA‑2025 | DRA‑2025 | Total Potential Increase |
|---|---|---|---|
| 1–16 | 10% | 30% | 40% |
| 17–22 | 10% | 15% | 25% |
What Next?
- Official notifications from the Finance Division and AGPR are expected soon.
- Employees should review payslips from July onward and use online tools provided by AGPR or their department’s portal to verify calculations.
- Federal pensioners will also benefit from the 7% increase in net pensions.
In summary, the 2025 federal budget has delivered a robust fiscal relief package for federal employees and pensioners. For BPS‑1 to 16, this translates to nearly a 40% boost in salary, while those in higher grades still gain a meaningful 25% uplift, subject to eligibility. Keep an eye out for official frameworks and departmental guidelines to fully benefit from these allowances.
