8th pay commission news: What is a central govt employee's salary structure, and how does ToR impact it? Explained.

Mint

3 days ago

8th pay commission news update: The Centre has approved implementation of the 8th Pay Commission, which is set to revise the allowances, pensions, and salaries of present and retired central government employees, in line with inflation. While this was announced by Union minister Ashwini Vaishnaw in January, since then, there is much buzz about what benefits are likely and when it will be implemented.
Notably, future moves are dependent on the 'Terms of Reference' or ToR, which Shiv Gopal Mishra, secretary, staff side of the National Council-Joint Consultative Machinery, told NDTV Profit is expected to be 'approved at the earliest'.
So, today, we take a look at how a central government employee's salary is structured and how the ToR impacts it.
The salary of a government employee consists of basic pay, dearness allowance (DA), house rent allowance (HRA) and transport allowance. The basic salary of employees constitutes 51.5 per cent of their total income,
DA accounts for approximately 30.9 per cent,
HRA accounts for about 15.4 per cent, and
Travel allowance accounts for around 2.2 per cent, according to a report by Ambit Institutional Equities.
ToR is a framework that defines the scope of a pay commission and specifies the areas in which it must offer recommendations.
In the absence of a ToR, the commission lacks official recognition and is unable to initiate its functions, making it extremely important for the implementation of the pay commission. Without it decisison on the revisions made by the commission, including basic pay structure, allowances, pension revisions and other changes, would be inapplicable.
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.
Recommendations of the 8th pay commission are expected to be implemented in FY27 and will likely to increase government salaries and pensions by 30-34 per cent, the report said.
It is expected to benefit over a crore of central government employees and retirees — nearly 50 lakh central government employees, including defence personnel; and close to 65 lakh central government pensioners, including defence retirees.
Notably, the 4.4 million central government employees and armed forces personnel represent 0.7 per cent of India's 60 crore labour force, and nearly 9 per cent of the formal sector, the report said.