8th Pay Commission: Great news for millions of central government workers and retirees! The central government has just given the green light for the Terms of Reference (ToR) for the 8th Pay Commission. This could lead to some major changes in salaries and pension plans for government employees in the upcoming months.
Justice (Retd.) Ranjana Desai will be leading this commission. They are expected to present their recommendations to the government in the next few months. Before that happens, they’ll be reaching out to employees, pensioners, and other interested parties to gather their thoughts.
Salary increases will hinge on the fitment factor
As with previous pay commissions, the fitment factor will be key in deciding salary adjustments this time around. In simple terms, the fitment factor is the multiplier used to calculate the new basic salary from the old one. Reports from brokerage firms like Kotak Institutional Equities and Ambit Capital suggest that this factor could range from 1.8 to 2.46.
If a fitment factor of 1.8 is applied, it’s estimated that the basic salary for Level-1 employees (like peons or attendants) could jump from Rs 18,000 to Rs 32,400. While this 80% increase sounds impressive, the actual raise might be lower since the dearness allowance (DA) will be set to zero when the new salary is rolled out.
Will DA really be reset to zero?
At present, Level-1 employees take home around Rs 29,000, which includes 58% DA and house rent allowance (HRA). Once the DA is reset to zero, their basic salary will rise, meaning that DA will no longer be a separate payment but will be included in their salary. This won’t cut into employees’ overall pay; instead, it will enhance the pay structure. The increase in the new basic salary will also affect HRA, transport allowance, and future pensions.