8th Pay Commission: Central government employees and pensioners are currently pondering how much their salaries will rise following the 8th Pay Commission’s implementation. While many are simply associating this with the fitment factor and dearness allowance (DA), the truth is that the decision regarding this significant salary increase hinges on a ‘special factor’. If this formula is approved, the minimum basic salary could potentially see an unprecedented rise of up to 283%.
This key factor involves a major shift in how the “family unit” is calculated. Let’s explore how this new formula will impact your take-home salary.
What is the ‘family unit’ and how was your salary determined previously?
The Pay Commission adheres to the standards set by the 15th Indian Labour Conference (ILC) of 1957 to establish minimum wages for workers. Up until the 7th Pay Commission, the government calculated the minimum basic pay by considering only three units per family:
Employee: 1 unit
Spouse: 1 unit
2 children (0.5 + 0.5): 1 unit
Total: 3 units
Based on this three-unit formula, the 7th Pay Commission applied a fitment factor of 2.57, which raised the minimum basic salary from Rs 7,000 to Rs 18,000.
New Proposal of 5 Units in the 8th Pay Commission
Employee unions are advocating for the definition of family to now encompass dependent parents. The calculations for units in the new proposal are as follows:
Employee: 1 unit
Spouse: 1 unit
2 children (0.8 + 0.8): 1.6 units
Dependent parents (0.8 + 0.8): 1.6 units
Total: 5.2 units (rounded to 5 units)
3 vs 5 Units: What Difference Will It Make to Your Salary?
Assuming that the current minimum monthly living expenses for an individual—covering essentials like food, clothing, electricity, rent, children’s education, and medical costs—amount to approximately Rs 13,800:
Using the old 3 unit formula: 3×Rs 13,800=Rs 41,400 (estimated minimum basic salary)
With the proposed 5 unit formula: 5×Rs 13,800=Rs 69,000 (proposed minimum basic salary)
It is clear that just by adding the expenses of parents (2 additional units), the basic pay of the employees will directly increase by Rs 27,600 per month!
With the fitment factor being 3.83, the basic pay of Rs 18,000 will become Rs 69,000.
The fitment factor is the multiplier used to multiply your old basic salary to arrive at your new basic pay. Applying the 5-unit formula will increase the fitment factor to 3.83.
Understand the calculation like this (Level-1 employee):
Current Basic Salary: Rs 18,000
New formula: Existing basic pay × fitment factor
New Basic Salary: Rs 18,000×3.83=Rs 68,940 (approximately Rs 69,000)
This means that once the 5-unit rule is passed, the basic pay will increase from Rs 18,000 to Rs 69,000. DA, HRA, and other allowances will be added separately.
Employee unions made these 3 strong legal arguments
The National Council of JCMs (NC-JCM) has placed before the 8th Pay Commission strong legal grounds for implementing 5 units:
Senior Citizens Act: Under the ‘Maintenance of Parents and Senior Citizens Act’, it is the legal and moral responsibility of the employee to take care of his/her elderly parents. The new labour codes have also officially included dependent parents in the definition of an employee’s family. The apex court (1991 and Bhupendra Nath Hazarika case) has clearly stated that the government should pay its employees wages not just ‘survival wages’ but also ‘dignified living’ wages.