8th Pay Commission Salary Calculation: There are many speculations about how much the salary of government employees will increase in the eighth pay commission. There is also a lot of discussion about the possible fitment factor for its calculation (8th Pay Commission Salary). Government employees are expecting a good hike. Brokerage firms and other experts have expressed their hopes about the possible fitment factor and the increase in salary based on it.
Recently Ambit Capital and Kotak Institutional Equities have released a research report. According to the research reports of both of them, the effective salary increase can be from 13% to 34%. Let us understand the complete calculation.
Fitment Factor and Increment
Ambit Capital said in a report released recently that the fitment factor used for salary revision can be between 1.83 to 2.46.
Base Case: If the fitment factor remains 1.83, then the effective salary can increase by 14%.
Median Case: A fitment factor of 2.15 can result in a 34% increase in salary.
Upper Case: If the fitment factor of 2.46 is recommended then the salary can increase by a whopping 54%.
On the other hand, Kotak Institutional Equities in its report on July 21 estimated a fitment factor of 1.8, which would lead to a salary hike of 13%.
Calculation of salary increment
The fitment factor of 1.8 means that the existing ‘basic’ salary will be multiplied by 1.8. However, the effective salary hike is less because the dearness allowance (DA) becomes zero when the new pay commission is implemented.
For example, the 7th Pay Commission suggested a fitment factor of 2.57. This increased the minimum basic salary from Rs 7,000 to Rs 18,000 in 2016 (7,000 x 2.57). However, the actual salary hike was much less if the dearness allowance is zeroed out.
Minimum Wage under 6th Pay Commission
Rs 7,000 (Basic Pay) + Rs 8,750 (DA) + Rs 2,100 (HRA) + Rs 1,350 (TA) = Rs 19,200.
Minimum Wage under 7th Pay Commission
Rs 18,000 (Basic Pay) + Rs 4,320 (HRA) + Rs 1,350 (TA) + 0 (DA) = Rs 23,670.
It was revised in this manner in 2016. Thus, after the implementation of the 7th Pay Commission 9 years ago, the minimum wage saw an effective increase of 14.3% from Rs 19,200 to Rs 23,670.
If the salary is 50 thousand then how much will it increase?
For example, we will calculate for a government employee whose current basic salary is Rs 50,000. Let us calculate what the possible salary hike will be after the implementation of the 8th Pay Commission.
Basic Pay: Rs 50,000
HRA (at 24%): Rs 12,000
TA: Rs 2,160
DA (at 55%): Rs 27,500
Total Salary: Rs.91,660
(It is worth noting that DA is calculated at 55%, during 7th Pay Commission it was 125%)
Now with a fitment factor of 1.82
New basic pay (50,000 x 1.82) = Rs 91,000
New HRA (91,000 x 24%) = Rs 21,840
TA = Rs 2,160
New DA = 0
New Total Salary: Rs 1,15,000 (Increase of about 25.46%)
With a fitment factor of 2.15:
New basic pay (50,000 x 2.15) = Rs 1,07,500
New HRA (1,07,500 x 24%) = Rs 25,800
New TA = Rs 2,160
New DA = 0
New Total Salary: Rs 1,35,460 (Increase of about 47.78%)
It is important to note that all the calculations given above are based on estimates.