Big Relief for Govt Employees: House Rent Allowance to Be Raised by 85% (Grades 1–22)

Islamabad, October 2025 — At long last, the federal government has approved a sweeping 85% increase in House Rent Allowance (HRA) for all government employees — from Grade 1 right up to Grade 22, whether permanent or contract. The move is meant to ease the burden of skyrocketing rents and inflation that have been eating into people’s salaries. The draft has been forwarded to the Federal Cabinet, and once it’s ratified, the revised allowance will kick in across all federal departments.

What’s New with the 85% HRA Increase?

• The Finance Division clarified that the new HRA will be based on the current basic salary, moving away from that outdated 2008 base used under the old system.
• In short: your housing benefit will now match today’s cost of living — not something fixed from nearly two decades ago.
• Officials believe this shift is especially important for lower grades in cities, where rent comprises a large share of monthly expenses.

As one finance insider put it:

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“This change is a necessary step to help employees manage rising rents and inflationary pressure.”

Key Highlights at a Glance

Why This Increase Matters

For years, housing benefits were calculated on a pay scale from 2008 — a system that hardly matched the reality of today’s rent in big cities. Many employees struggled to find decent accommodation without stretching their income to breaking point.

This 85% hike aims to bridge that gap. More importantly, it reflects an effort to make compensation more fair, relevant, and humane— so public servants can breathe easier and not worry so much about where they’ll live.

Who Gains the Most?

Lower & Middle Grades (BPS 1–16)

These employees are likely to feel the biggest relief. With rents eating up a significant chunk of their income, this hike can make a real difference in their day‑to‑day budgets.

Senior Officers (BPS 17–22)

While their relative comfort was already higher, they’ll also see improved allowances that align better with modern costs. The revision closes some long‑standing gaps between different departments.

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Contract & Adhoc Employees

A nice move here: unlike earlier adjustments, this increase includes contractual and project‑based employees too. No one gets left out just because of employment status.

Moving Away from the 2008 Base — Why It’s a Big Deal

Using a 2008 base for housing allowance was always a sore point. Experts often criticized it for being outdated and disconnected from reality. With this reform, allowances will directly reflect current salaries — a change that feels both overdue and necessary.

So many times, employees would look at HRA and shake their heads: “This makes no sense in today’s rent prices.” Now, that gap starts to close.

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When Will It Be Implemented?

• The Finance Ministry says the summary is already with the Federal Cabinet, and final approval is expected this month.
• If all goes well, revised payslips with the new HRA may start appearing in November 2025 salaries.
• Departments have been told to update their payroll systems ASAP so there’s no delay once the green light comes.

Reactions from Government Employees

Unsurprisingly, the response has been overwhelmingly positive. Public sector unions hailed it as a “long overdue, powerful boost” for employees and their families.

One union rep said:

“For years we’ve demanded fair rent revisions. Seeing the government take this step shows they’re listening.”

Many are now hopeful that medical and transport allowances will also be reviewed soon to match inflation.

In the Larger Economic Picture

This move comes at a time when inflation is high and urban rents have surged — sometimes more than 50% in major cities over the past few years. By lifting HRA so sharply, the government aims to ease some of that pressure on employees and boost confidence across sectors.

We’ll see if this also helps consumer demand, hospital bills, and even the morale of public servants.

Key Benefits of This 85% Increase

1. More take‑home money — you’ll see a real boost after accounting for rent.
2. Better affordability — rent in cities becomes more manageable.
3. Inclusive — permanent, contractual, and ad hoc workers all benefit.
4. Modern calculation — your allowance is tied to your current pay, not some outdated number.
5. Fairer structure — long‑overdue correction to the old base system.

Final Thoughts

This 85% HRA increase could be a turning point. It’s not just a boost to your salary — it’s a signal that the government is mindful of public servants’ realities. If implemented smoothly, it might help ease the financial squeeze many workers face.

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