The Centre announced the 8th Pay Commission in January, 2025, to assess the current salary structure of employees of both the central and state governments. While there had been no appointment of panel members or chairperson so far, the government has recently hinted at the constitution of a panel, saying an official notification will be issued “in due course”.
The 8th Pay Commission is expected to start its term from January 1, 2026, once the 7th Pay Commission completes its 10-year-term on December 31, 2025.
The previous commission had introduced a structured pay matrix that replaced the previous grade pay system with levels. Now, over a crore serving employees and pensioners await the government’s notification of the Terms of Reference (ToR) for revised salaries and pensions.
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Meanwhile, suggestions for the ToR have been submitted to the Union Cabinet Secretary by the National Joint Consultative Mechanism that represents central government employees and pensioners.
What is a Pay Commission?
A Pay Commission is set up every 10 years to review the salary, pension, allowance, and other benefits given to government employees.
A pay panel submits its report on this within a time frame of 18-24 months, based on which the Centre decides upon a new salary structure to be implemented.
However, it is only after the ToR is finalised and the members and chairperson have been appointed that the panel can submit its report, which takes at least 18 months. The last panel’s recommendations had also got delayed and implemented retrospectively on January 1, 2016.
8th Pay Commission updates
In its reply to a query in the Rajya Sabha, the Ministry of Finance has clarified that the appointment of the 8th Pay Commission’s members and chairperson would be finalised once the commission is finally notified by the government.
Reports by various dailies suggest that the hike in salaries by the 8th Pay Commission may be up to 30-34 per cent, costing the government almost ₹1.8 lakh crore.
Additionally, the fitment factor is likely to be set between 1.83 and 2.46, which would mark a significant boost for government employees across the country.
What’s a ‘Fitment Factor’?
The fitment factor is a multiplier used by Pay Commissions to calculate the revised basic pay for government employees and pensioners.
It basically determines the extent of the salary hike when transitioning to a new pay structure. For instance, if the fitment factor is 2.46, the existing basic pay is multiplied by 2.46 to arrive at the new basic pay.
The 8th Pay Commission is expected to mark the Fitment Factor anywhere between 1.83 and 2.46.
This revision aims to align salaries with current economic conditions, offering a more substantial increase compared to previous pay commissions.
Expected salary hike
While reports suggest a significant salary hike to be brought in by the 8th Pay Commission, the Dearness Allowance (DA) component, which currently stands at 55 per cent of the basic pay, will be reset to zero once the 8th Pay Commission is implemented.
This reset means that while the fitment factor may increase basic salaries substantially, the effective hike will be slightly lower due to the removal of the DA.
For instance, an employee with a basic salary of ₹18,000 could see salary rise to ₹32,940 at the lower end of the fitment factor (1.83) and ₹44,280 at the upper end (2.46).
For employees earning a higher base salary, such as ₹50,000, the revised salary could increase to ₹91,500 at the lower end and ₹1.23 lakh at the upper end.
But in reality, the actual increase may be slightly lower due to the reset of the Dearness Allowance (DA) to zero once the new Pay Commission is implemented.
Salary structure
Once the basic salary is determined by applying the fitment factor to the current basic pay, all key allowances, including Dearness Allowance (DA), House Rent Allowance (HRA), and Travel Allowance (TA) will be re-calculated based on the updated basic pay.
The total earnings will therefore comprise sum of basic pay and allowances, and reflect the overall remuneration of an employee under the new structure.
Implementation Date
Since there is a decade-long-gap between two consecutive pay commissions, the 8th Pay Commission should ideally come into effect on January 1, 2026, benefitting about 50 lakh central government employees that include defense personnel, and as many as 65 lakh pensioners.
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