8th Pay Commission: The Union Cabinet recently approved the Terms of Reference (ToR) for the 8th Pay Commission, formally laying the groundwork for major revisions to the salaries and pensions of government employees. The panel will be headed by Justice (Retd.) Ranjana Desai.
What is the fitment factor?
The fitment factor is a coefficient that is multiplied by the existing basic pay to determine the new basic pay.
What can Level 1 employees expect?
According to research reports from Kotak Institutional Equities and Ambit Capital, the fitment factor—the multiplying unit of salary revisions—is expected to be between 1.8 and 2.46. Kotak estimates a single fitment factor of 1.8, which would increase the basic minimum salary of Level 1 employees, including peons and attendants, from Rs 18,000 to Rs 32,400.
While this represents an 80% salary hike, the effective pay increase will be lower, as the dearness allowance will be zero. This is typically done whenever a new pay commission is implemented, the report said. Currently, the dearness allowance is 58%, and with house rent allowance, the total entry salary for Level 1 employees is approximately Rs 29,000.
Ambit Capital indicated that under a base-case fitment factor of 1.82, effective salary increases could reach 14%, while their average-case scenario of 2.15 could result in a 34% salary increase. At the upper end, a fitment factor of 2.46 could be recommended, meaning the basic salary of Level 1 employees could increase by up to 54%.
Salary hike limit for Level 1 employees
Let’s take a look at the potential salary hikes for Level 1 employees, based on the fitment factor estimated by the brokerage:
– Fitment factor of 1.82: Basic pay of Rs 18,000 may increase to Rs 32,760.
– Fitment factor of 2.15: Basic pay of Rs 18,000 may increase to Rs 38,700.
– Fitment factor of 2.46: Basic pay of Rs 18,000 may increase to Rs 44,280.
However, these figures only reflect basic pay. Including the current 58% dearness allowance (DA), house rent allowance, and transport allowance, the effective increase will be less than the headline figures.