The Union Cabinet has approved the establishment of the 8th Pay Commission to review the salaries and pensions of central government employees and pensioners.
The announcement, made by Union Minister Ashwini Vaishnaw on Thursday, brings hope of significant financial relief for millions of individuals amidst mounting inflationary pressures.
Speaking at a press briefing, Vaishnaw confirmed, “The commission will likely be established soon,” though specific timelines remain unannounced.
Potential increase in pensions
Currently, pensions are disbursed based on the 7th Pay Commission’s recommendations, which came into effect on 1 January 2016.
The new pay commission is expected to bring about pension increases ranging between 20 and 30 per cent, depending on the fitment factor approved.
According to Krishnendu Chatterjee, Vice President at TeamLease, “The average pension hike should be in line with the hike in salaries. It is expected to be in a fitment factor of 2.5–2.8, thus increasing the pension from the current Rs 9,000 to anywhere between Rs 22,500 and Rs 25,200.”
Sumit Dhar, Partner at Fox Mandal & Associates LLP, added, “If the fitment factor of 2.86 is approved in the 8th Pay Commission by the government, the minimum salary and pension of government employees are expected to increase by 186 per cent.”
Economic factors and government decisions
Ritika Nayyar, Partner at Singhania & Co, highlighted that the pension hike would ultimately depend on multiple variables, including economic conditions and budgetary constraints.
She noted, “Though predicting the hike is practically not feasible, based on the average pension hike percentages from previous pay commissions, the 8th Pay Commission may provide an average pension hike in the range of 20% to 30%.”
Past trends offer insights into the expected changes. For example, the 7th Pay Commission implemented a fitment factor of 2.57, leading to pension increases of 23–25 per cent.
Aligning with these precedents, Nihal Bhardwaj, Senior Associate at SKV Law Offices, remarked, “Pensions under the 8th Pay Commission are likely to increase in line with the salary revisions, with an average hike of 25–30% expected.”
Bhardwaj also suggested that enhancements for retirees might include additional allowances for senior pensioners and higher dearness relief (DR) to offset inflation.
The fitment factor, a key multiplier in calculating revised pensions, will play a pivotal role in determining the extent of increases.
Illustrative projections
For instance, with a fitment factor of 2.5, a current basic pension of Rs 30,000 would rise to Rs 75,000 under the revised structure.
Dearness relief (DR) is reset to zero initially and incrementally increased to account for inflation.
The commission’s recommendations, once submitted and approved, will determine the precise quantum of revisions, impacting millions of employees and retirees alike.
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