Over one lakh employees of the Steel Authority of India Limited are set to receive a pay hike of over eight per cent following government's approval to merge their dearness allowance with the basic pay.

"Steel Minister Ram Vilas Paswan has just cleared the proposal," a senior official in the Steel Ministry told PTI.

The proposal was put up before the minister after its clearance from the board of SAIL on May 16.

The merger of 50 per cent dearness allowance (DA) with the basic pay will be effective from January 1, 2007, resulting in cash outgo of about Rs 250 crore on account of arrears. The per employee arrear will be between Rs 60,000 and Rs 1.20 lakh.

The monthly additional wage expenses for the Navratna firm would be Rs 60 crore. At present, the employees are entitled to 84 per cent DA.

SAIL would be the first PSU under the Steel Ministry to extend the benefit to its employees. Other PSUs under the administrative control of the ministry are also expected to follow the suit.

State-run SAIL posted over Rs 1,800 crore net profit for the first quarter of the current fiscal.

While recommendations of the revision committee for PSU executives are under consideration of the government, it is left up to the individual companies to negotiate their salary structure for the non-executive staff.

However, the increase in wage allowances for the non-executive staffs by individual PSUs must follow guidelines of the Department of Public Enterprises.