Union Cabinet has given in-principle approval for the formation of the 8th Pay Commission, which will revise salaries, pensions, and allowances for central government employees and pensioners.
According to reports by Ambit Institutional Equities, the commission is expected to submit its recommendations by the end of 2025, with implementation likely to begin from January 1, 2026.
However, historical trends suggest a possible delay.
For instance, the 7th Pay Commission, announced in 2014, was implemented only in 2016.
If similar delays occur, the rollout of the 8th Pay Commission could extend into FY27.
Expected Salary Hike: 30–34% Increase on the Cards
The 8th Pay Commission is projected to recommend a 30–34% hike in salaries and pensions for central government employees and retirees.
This increase is expected to align with inflation trends, cost-of-living adjustments, and economic growth.
- Minimum basic salary may rise from ₹18,000 to ₹51,480, based on a proposed fitment factor of 2.86 to 3.0, up from 2.57 under the 7th Pay Commission.
- The hike could cost the government an additional ₹1.8 lakh crore, but is also expected to boost domestic consumption and improve employee morale.
Fitment Factor: The Key to Salary Calculations
The fitment factor is a multiplier used to revise basic pay. Under the 7th Pay Commission, it was set at 2.57, resulting in a modest 14.3% increase in basic pay.
Analysts expect the 8th Pay Commission to recommend a higher factor, possibly between 2.86 and 3.2, to better reflect inflation and living costs.
8th Pay Commission: Who Will Benefit?
The 8th Pay Commission will directly impact over 1.12 crore individuals, including:
- 44 lakh serving central government employees
- 68 lakh pensioners, including defence retirees
These beneficiaries represent a significant portion of India’s formal workforce, despite comprising just 0.7% of the total labour force.
Salary Structure: What Will Change?
The revised salary will include:
- Basic Pay: Core component based on pay level and seniority
- Dearness Allowance (DA): Inflation-linked adjustment, reset to zero at the start of a new commission
- House Rent Allowance (HRA): Varies by location
- Transport Allowance (TA): Fixed monthly amount based on city type
The Pay Matrix system, introduced in the 7th CPC, will continue to guide salary revisions across 24 levels.
Experts believe the proposed hike will outpace inflation, which is expected to hover around 6–7%, thereby improving purchasing power and quality of life for government employees.
The commission also aims to simplify pay structures and ensure equitable compensation across roles.
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