8th Pay Commission: Major news for central government employees. In January, the Union Cabinet approved the formation of the 8th Pay Commission to revise the salaries of approximately 5 million central government employees and the allowances of approximately 6.5 million pensioners. However, key details, including the Terms of Reference (ToR) and panel members, are yet to be finalized. Historically, pay commissions have been formed approximately every ten years, and their implementation begins approximately two years after their formation.
When was the 7th Pay Commission implemented?
The 7th Pay Commission, constituted in 2014, came into effect on January 1, 2016, resulting in an average salary increase of approximately 23% for central government employees. The 6th Pay Commission, constituted in October 2006, increased salaries by approximately 40% from January 1, 2006. Given this pattern, experts suggest that the 8th Pay Commission’s recommendations could be implemented around 2028. Kotak Institutional Equities reported that the panel’s recommendations are unlikely to be implemented before late 2026 or early 2027.
The Finance Ministry had informed Parliament in July that the government was actively working to expedite the formation of the Commission through consultations with key stakeholders, including state governments, the Defence Ministry, the Home Ministry and the Department of Personnel and Training.
What will be the fitment factor?
The fitment factor, the multiplier used to adjust existing pay scales under the new Pay Commission, is expected to be 1.8 for the Eighth Pay Commission. This factor will directly impact the revised salaries of central government employees. Based on this estimated fitment factor, it is estimated that the minimum salary of central government employees could increase from Rs 18,000 per month to Rs 30,000 per month. According to Kotak Institutional Equities, the average salary of central government employees could actually increase by approximately 13%.
What is fitment factor?
A key component of salary determination under the 8th Pay Commission is the fitment factor. This multiplier is used to calculate the new basic pay by multiplying an employee’s current basic pay by an amount. To illustrate, the minimum basic pay under the 6th Pay Commission was Rs 7,000. The 7th Pay Commission implemented a fitment factor of 2.57, increasing the minimum basic pay to Rs 18,000.