The most discussed topic among central employees and pensioners these days is the fitment factor, which decides how pay and pension are revised. Recently, the central government approved the Terms of Reference (TOR) for the Eighth Pay Commission, raising employees’ hopes once again. The Eighth Pay Commission is headed by Justice (Retd.) Ranjan Desai. The commission will hold meetings with different stakeholders in the coming months and then give its recommendations for pay revision.
The employee wing of the National Council–Joint Consultative Machinery (NC-JCM), which represents central employees, will play an important role in this process. A senior member said they want the Eighth Pay Commission to keep the fitment factor at least 2.57, similar to what the Seventh Pay Commission recommended. However, there has been no official statement from the NC-JCM on this. A member explained that factors like the inflation rate, cost of living index, and Dr. Aykroyd’s formula are considered before fixing the fitment factor.
What is Dr. Aykroyd’s Formula?
Dr. Wallace R. Aykroyd was a famous American nutritionist. His formula checks how the prices of goods change based on what an average person buys. The Labour Bureau in Shimla reviews this index from time to time.
What Reports Say About the 8th Pay Commission
A report by Ambit Capital (July 9) said the government may not set the fitment factor above 2.46 in the 8th Pay Commission. The report showed that the range could be between 1.83 and 2.46. It also said that while some people expect the factor to be 2.57 or 2.86, it is unlikely to happen.
Another report by Kotak Institutional Equities (July 21) said the fitment factor may be around 1.8. This means the basic salary of employees could rise by 1.8 times, or 80%. But after the 8th Pay Commission starts, the Dearness Allowance (DA), which is now 58%, will reset to zero. This will reduce the overall impact of the salary hike.
Estimated Salary Hike as per Fitment Factor
Ambit Capital said a fitment factor between 1.83 and 2.46 can increase salaries by 14% to 34%. Kotak’s report said a 1.8 factor could give a 13% hike. Even though the 7th Pay Commission had a 2.57 factor, the real increase was only 14.3% because the DA of 125% from the 6th Pay Commission was reset to zero.
Minimum Wage Under the Seventh Pay Commission (2016)
- Basic Pay: ₹18,000
- House Rent Allowance (HRA): ₹4,320
- Travelling Allowance (TA): ₹1,350
- Dearness Allowance (DA): ₹0
- Total Pay: ₹23,670
- After adding 58% DA, the minimum wage is now about ₹34,110.
Expected Minimum Basic Pay in the Eighth Pay Commission
The minimum basic pay of central employees may rise a lot under the 8th Pay Commission. The current basic pay is ₹18,000.
At a 1.8 fitment factor, it becomes ₹32,400.
At 2.0, it becomes ₹36,000.
At 2.46, it becomes ₹44,280.
At 2.57, it becomes ₹46,260.
Until the Pay Commission submits the report and the government gives the go-ahead, we won’t know the final number. However, the earliest estimates indicate an increase in salaries of 80% to 157%, which is significant enough to make a big difference to the overall pay structure.