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Time of India
2 days ago
- Business
- Time of India
8th Pay Commission salary hike may miss January 2026 deadline: Will it impact fitment factor calculation?
Why the 8th Pay Commission might be delayed beyond January 2026? Live Events Fitment factor Dearness Allowance (DA) to be merged with basic pay Pensioners may see revised benefits What government employees should prepare for For nearly 35 lakh central government employees and over 67 lakh pensioners, the 8th Pay Commission has become a source of speculation. With growing chatter around possible pay hikes and revised pension benefits, expectations are soaring. Despite the excitement, there's still no official word from the government on when the 8th Pay Commission will be constituted, leaving many in employee unions have begun voicing concern over the delay, urging the government to form the Commission well in advance to ensure timely implementation and reduce uncertainty for both employees and 7th Pay Commission, which came into effect in January 2016, was announced nearly two years prior, in February 2014. That timeline gave enough room for report submission, cabinet approval, and a timely rollout. However, as of mid-2025, the 8th Pay Commission is yet to be formed, and the crucial Terms of Reference (ToR), which define the scope and goals of the commission, haven't been finalised officials have confirmed that internal discussions are underway, but given the pace of bureaucratic processes, the rollout may stretch well beyond the expected January 1, 2026 timeline. Even if the Commission is announced by the end of this year, historical patterns indicate a gap of 18-24 months before the recommendations are ready for implementation. At this pace, the hike might only materialise by late 2026 or early to the delay are fiscal constraints, with the government balancing welfare spending, election promises, and fiscal deficit targets. A generous hike could significantly strain the exchequer, prompting policymakers to tread carefully.A major part of the salary revision hinges on the fitment factor, Fitment factor is the number used to recalculate an employee's basic salary. In the 7th Pay Commission, this was set at 2.57, raising the minimum pay from Rs 7,000 to Rs 18,000. Going by the views expressed by various experts 8th Pay Commission could recommend a fitment factor between 2.5 and 2.86. "Considering the inflation factor, there are indications that the fitment factor may stay between 2.5- 2.8 times, which will give a significant boost to employee salaries between Rs 40,000 and Rs 45,000," says Krishnendu Chatterjee, Vice President at the top-end 2.86 figure is accepted, the minimum basic salary could climb to over Rs 51,000. However, due to its fiscal implications, such a steep hike may be challenging. A 2.6x to 2.7x hike appears to be more likely, providing a significant increase while keeping the government's finances in fitment factor for the 7th Pay Commission was 2.57 and the minimum basic salary was hiked to Rs 18,000 from Rs 7,000. For the 6th Pay Commission, the fitment factor was 1.86 and the minimum basic salary was raised from Rs 2,750 to Rs 7, likely shift is the merger of the Dearness Allowance with the basic salary. Currently pegged at around 55% effective from January 2025, DA helps offset the impact of inflation and is revised twice in a year. Before the effective date of 8th Pay Commission early next year, there is one more DA hike is due to be announced in coming months which will be effective from July 2025. When a new Pay Commission is implemented, DA accumulated up to that point is typically merged into the revised basic this increases the overall salary package, it also means future DA hikes start from zero. Employees will see a rise in gross salary and related allowances, such as HRA and transport, but may also experience low DA in the near term. However, a higher base salary will mean that each DA hike will mean a higher increase in implementation of the 8th Pay Commission is not only being eagerly awaited by salaried employees. Nearly 67 lakh government pensioners are also impacted by any revision in the pay scale. Previous Pay Commissions have included changes in pension calculation formulas and benefits, and similar adjustments are expected this time as merger of Dearness Relief (DR) into basic pension also affects pensioners, as their payouts are tied to similar structures. Any revision in the base figures could significantly alter monthly pension employees' associations have echoed the concerns of serving staff, pushing for greater clarity from the government on how pension recalculations will be carried out in the new the uncertainty, a few things seem inevitable. A revised pay structure is coming, but it may take longer than expected. The eventual hike could push minimum salaries up to Rs 40,000 - Rs 45,000, with pension adjustments following suit. DA will reset, but higher allowances may offset the initial flattening in salary government staff would do well to temper expectations, at least in terms of timing. The gains could be significant, but the road to them may be more drawn out than previous 8th Pay Commission is aimed to deliver significant financial changes for government employees and pensioners. Yet, the pace of bureaucracy, pending approvals, and fiscal balancing may delay the implementation beyond the earlier-set target of January 2026.
Business Recorder
23-05-2025
- Business
- Business Recorder
Economist urges depoliticisation of NFC award, proposes new formula
The federal government should depoliticise the National Finance Commission (NFC) award by appointing technocrats rather than politicians and revising the distribution formula, said noted economist Dr Ashfaque Hassan Khan. The economist made these recommendations in his report 'NFC Award and Population: Has It Distorted Pakistan's Population?' Currently, the President of Pakistan constitutes a Finance Commission for five five-year terms under Article 180 of the Constitution. The President may constitute the Commission consisting of non-political figures,' the report states. The proposed Commission will have a secretariat with professional and administrative staff to provide research and secretarial assistance to the chairperson and members of the Commission. Weightage of population in NFC 'Once the Commission is constituted by the President, the government may provide the Terms of Reference (TOR) to the Finance Commission at the beginning of the Commission, based on the priorities of the government,' read the report. Moreover, the Commission will have the authority to change the parameters as well as their weights for resource distribution between the federal and provincial governments and among the provinces to complete their assignments according to the TOR provided by the government, it added. Dr. Ashfaque's report highlights several flaws in the current NFC setup, particularly criticising the overreliance on population as the dominant criterion for resource allocation. The report noted that from 1974 to 2009, population was the sole criterion, i.e. 100%, used to allocate funds among provinces. However, the 7th NFC Award of 2010 introduced multiple criteria including, poverty/backwardness, revenue collection and inverse population density, but population remained the dominant indicator with 82% weight. NFC award major reason behind govt's inability to go after untaxed sectors: economist The report proposed that the weight of the population is reduced to 25%, with 15% weightage given to the population of the 1998 census and 10% to the population of the 2023 census of each province. Dr Ashfaque suggested using the income gap as the key indicator for the NFC award, with a 30% weight. 'The larger the income gap of the province with the richest province, the more resources are provided to the provinces to minimise the gap.'
The Hindu
22-04-2025
- Business
- The Hindu
‘Right decision will be taken at appropriate time': T.N. Finance Minister on Old Pension Scheme
Tamil Nadu Finance Minister Thangam Thennarasu on Tuesday (April 22, 2025) maintained that the State government would 'take the right decision at the appropriate time' regarding the demands of government employees to resume the Old Pension Scheme. During the Question Hour in the Assembly, Mr. Thennarasu said: 'The government and the Chief Minister have carefully taken their all demands into consideration. I will discuss this demand with the Chief Minister and consult with the committee. The government will take the right decision at the appropriate time.' The Minister was responding to a query by AIADMK legislator K. Maragatham Kumaravel (Madurantakam), who sought to know whether the State government would resume the Old Pension Scheme, a demand put forth by lakhs of government employees. 'As for the [demand to resume] the Old Pension Scheme, the government has constituted a committee led by IAS officer Gagandeep Singh Bedi. The Terms of Reference have also been issued,' Mr. Thennarasu recalled. He said that many associations of government employees and teachers had submitted their representations to the government through the committee. 'Minister for Public Works and I have held talks with them,' he recalled. The Chief Minister is concerned over the welfare of government employees, and the State government has been considering their demands with care, he said. Mr. Thennarasu also recalled the announcement made by him during his Budget speech for 2025-26 for government employees.
