8th pay commission: When is hike likely? How much will salaries rise? — All your questions answered

Mint

3 days ago

8th pay commission, all your questions answered: The Centre's has approved the implementation of the 8th Pay Commission, which is set to revise allowances (including Dearness Allowance or DA in line with inflation), pensions, and salaries for present and retired central government employees, union minister Ashwini Vaishnaw said in January.
Since then, there has been much buzz about what benefits are likely and when it will be implemented. A big concern for many is the fitment factor, and how this will impact salary and pension.
According to Vaishnaw, the commission will likely be formed by January 2026, with close to 1 crore central government employees and pensioners awaiting the Terms of Reference (ToR) for the 8th Pay Commission.
Earlier this year, Shiv Gopal Mishra, secretary, staff side of the National Council-Joint Consultative Machinery, told NDTV Profit, that they expect the ToR to be 'approved at the earliest'.
The recommendations of the 8th Pay Commission are expected to be submitted by 2025-end, and is scheduled to come into effect from January 2026, according to a report by Ambit Institutional Equities.
However, the actual rollout will depend on the completion of the report, its submission to the government, and the approval of its recommendations.
Per the process of proposal-submission-approval, the actual implementation is likely to be in FY27, with an expected hike of around 30-34 per cent, the Ambit report said.
A report by The Economic Times, citing precedence to report that since ToRs are not yet finalised, the 8th Pay Commission may be delayed beyond the expected timeline of January 2026 — till late 2026 or early 2027. For reference, the 7th Pay Commission, which was announced in February 2014, came into effect almost two years later in January 2016. As many as 50 lakh central government employees, including defence personnel, are the beneficiaries of the 8th Pay Commission.
Further, close to 65 lakh Central government pensioners, including defence retirees, are expected to benefit due to the latest Commission.
While the government has not given official numbers on the percentage of salary hikes under the 8th Pay Commission, according to estimates, the fitment factor, the salary of employees could be hiked. The minimum basic salary could be hiked to ₹ 51,480 from ₹ 18,000, according to Business Today.
51,480 from 18,000, according to Business Today. A report by Ambit Institutional Equities said that the 8th Pay Commission's recommendations are expected to hike salaries of government employees and pensioners by 30-34 per cent. It rationalised that this would be in line with the Centre's earlier decision to cut taxes amounting to ₹ 1 trillion in FY26.
Notably, the 8th Pay Commission salary hike would cost the Centre around an additional ₹ 1.8 lakh crore when implemented at this rate, as per the report.
Over the three decades of pay commissions, the government has experimented with its structure – Grade Pay, Pay Bands, and the Pay Matrix. Each of them have set a norm for how salaries have been revised through the decades.
Before 6th CPC, there were over 4,000 disparate pay scales across roles, which complicated salary calculations. That comission however introduced Pay Bands and Grade Pay, simplifying the payment process for each role.
The 7th CPC brought the real gamechanger — the Pay Matrix. The commission created a 24-level Pay Matrix, with each cell representing unique salaries. Under the 7th CPC, the fitment factor was revised at 2.57.
To understand how the new salaries for central government employees will be calculated, here's a look at their salary structure —
Basic Pay: The fixed core component of the salary, determined by the employee's pay level, reflecting their role and seniority. The basic salary of employees constitutes 51.5 per cent of their total income.
Dearness Allowance (DA): This is a cost-of-living adjustment. It is a percentage of the basic salary designed to neutralise the impact of inflation and maintain purchasing power. DA rates are revised periodically, typically twice a year, based on the Consumer Price Index (CPI). For instance, if basic pay is ₹ 18,000 and the current DA rate is 50 per cent, then DA equals 50 per cent of ₹ 18,000 = ₹ 9,000. This ₹ 9,000 is added to the basic pay, making the total pay higher to offset rising living costs. DA accounts for approximately 30.9 per cent of the total income.
House Rent Allowance (HRA): A portion of basic pay to cover rental housing expenses, varying by location. HRA accounts for about 15.4 per cent of the total income.
Transport Allowance (TA): A fixed monthly amount to cover commuting costs, based on pay level and city type. This accounts for around 2.2 per cent of the total income.
The 7th Pay Commission set the fitment factor to 2.57 per cent, hiking the basic pay to ₹ 18,000 minimum. However, DA was reset to zero at the start of the new Commission. Consequently, the actual increase in the salary component was 14.3 per cent.
Therefore, a 2.57 fitment factor does not mean a 2.57 times increase in salary, as the hike was only implemented on the basic pay.
As soon as a Pay Commission ends, the DA becomes zero as the index is re-based. A similar effect is expected to happen under the 8th Pay Commission.
The central government constituted a pay commission typically once every 10 years to review and recommend changes to the salary structure of government employees. The government has established seven pay commissions since 1946.
Factors including inflation, the state of the economy, income disparities, and related indicators are considered by the Commission. Additionally, it reviews bonuses, perks, allowances, and other benefits provided to government employees.
The recommendations of the 7th Pay Commission, formed in 2014 by the Manmohan Singh-led UPA government, are currently being followed. The recommendations of the 7th Pay Commission were implemented on January 1, 2016.