8th Pay Commission: The central government has just given the green light to the Terms of Reference (ToR) for the 8th Pay Commission. This news has sparked optimism for salary and pension hikes for around 10 million central government employees and pensioners. The salary adjustments in this pay commission will hinge on a crucial formula known as the fitment factor. In simple terms, this factor dictates how much the current basic salary will rise.

What exactly is the fitment factor?

The fitment factor acts as a multiplier that takes the existing basic salary and helps calculate the new basic salary. Its main goal is to counteract inflation and ensure that employees’ real income remains stable.

How will the fitment factor be determined in the 8th Pay Commission?

  • Inflation has been on the rise lately
  • Employees’ purchasing power has diminished
  • The government’s financial health
  • The necessity to keep skilled individuals in government roles

Tax experts point out that the last pay revision happened about a decade ago, and household expenses have surged significantly since then. Hence, the new Pay Commission will need to adjust salaries to reflect the current economic landscape.

What might the fitment factor look like in the 8th Pay Commission?

While the government hasn’t released any official numbers yet, early estimates indicate that the fitment factor could range from 1.83 to 2.57. If they go with the higher end, meaning a fitment factor of 2.57, employees and pensioners could experience a substantial boost in their salaries and pensions.

What was the fitment factor in the 7th Pay Commission?

The 7th Pay Commission had a fitment factor set at 2.57. However, this doesn’t imply that the entire salary was simply multiplied by 2.57. This factor was only applied to the basic pay. It’s also important to mention that when a new Pay Commission is rolled out, the dearness allowance (DA) is reset to zero because the inflation index starts fresh. This same approach might be taken for the 8th Pay Commission.

What is special for employees?

If the 8th Pay Commission sets a higher fitment factor, it will directly benefit employees’ monthly salaries, pensions, and other allowances. This is expected to provide significant relief to government employees amid rising inflation. Simply put, the 8th Pay Commission aims to strengthen both the pockets and the future of government employees.