Wary of annoying unemployed youth, government reluctant to raise employees’ retirement age

The state government is yet to take a call on the contentious issue of raising the retirement age of its employees by one year. The government is wary of incurring the wrath of the unemployed youth if it takes the decision even if it is a one-time measure to tide over the financial crisis.

The state government has been deliberating on the issue for the past some time. Being a double-edged sword, the decision can have a negative fallout and serious implications for the government. Which is why it has so far not raised the retirement age of its employees as a one-time measure to defer the financial liability obtaining due to their superannuation.

Highly-placed sources said that the issue was discussed at length in the Cabinet meeting in July but no final decision was taken due to conflicting views expressed by ministers. Now, it has been left to Chief Minister Sukhvinder Singh Sukhu to take the decision but he has said on several occasions that the Cabinet would take the decision after due deliberations.

The government is looking at ways and means to cut and defer expenditure, as the current financial year (2025-26) is going to be very difficult for it. It is hoping to get some respite when the state is allocated funds based on the 16th Finance Commission’s recommendations for 2026-31.

It is not for the first time that the retirement age of the employees will be raised. The Congress government headed by Chief Minister Virbhadra Singh, who also held the finance portfolio, had deferred the retirement of government employees by a year in the nineties.

It has been learnt that the Finance Department has made a detailed presentation before the Cabinet on measures that can help tide over the financial liabilities. One of the suggestions made was that the retirement of employees should be deferred by a year by raising the age of superannuation from 58 to 59 as a one-time measure.

It is estimated that this decision can help postpone the financial liability to the tune of over Rs 3,000 crore on account of the pension benefits of employees, who are due to retire within a year.

Double-edged sword

This decision, if taken, will be like a double-edged sword. The government is hesitant to raise the retirement age of the employees, as it can have a serious fallout in the form of widespread resentment among the unemployed youth. The unemployment scenario is grim in the state, which has about nine lakh educated jobless persons. As such, the government is also weighing the potential political implications of the decision, especially in view of the scheduled elections to the urban local bodies and panchayati raj institutions later this year.

Recommendations of the Cabinet Sub-committee

The Cabinet Sub-Committee on Resource Mobilisation, headed by Deputy Chief Minister Mukesh Agnihotri, in its report submitted before the Cabinet in April 2025, made recommendations not only to generate resources but also to cut wasteful expenditure. One of the major recommendations was to raise the retirement age of the employees to defer the pension liability.

Committed liability of salaries, pension

The annual salary and pension bill of government employees has increased to Rs 26,722 crore at a time when the revenue deficit grant is decreasing and the GST compensation has ended. Out of every Rs 100 that the government spends, Rs 25 goes to the payment of salaries and Rs 20 to the payment of pension.

There were 190,481 regular employees in various government departments as on March 2023, besides 19,000 employees in various boards and corporations.

Besides, there were around 30,000 employees serving on contract and daily wage basis and 50,000 were hired on the outsourced basis. There are over two lakh pensioners in the state and their committed liability has crossed Rs 800 crore every year.