8th Pay Commission to Reshape Salary Structure: Major Hike Expected for Over 1 Crore Employees and Pensioners

The Central Government has officially approved the Terms of Reference (ToR) for the 8th Central Pay Commission, setting the stage for another major revision in the salaries and pensions of central government employees. This move is expected to benefit nearly 50 lakh serving employees and over 70 lakh pensioners across the country.

According to the notification, the newly formed Pay Commission will submit its final report within 18 months, with the possibility of presenting an interim report if required. Based on this timeline, the salary revisions are likely to be implemented by 2027.

Structure of the 8th Pay Commission

The 8th Central Pay Commission will be a temporary body consisting of a Chairperson, one part-time member, and a Member-Secretary. The commission will be headed by Justice (Retd.) Ranjan Desai, who will lead the team in evaluating the existing pay structure and recommending changes.

The Commission’s primary responsibility will be to review the salary structure, allowances, and pension system for central government employees and suggest revisions that align with current economic realities.

Key Focus Areas of the 8th Pay Commission

The Pay Commission will take into account several crucial factors before submitting its recommendations, including:

• The current economic condition of the country and the need for financial discipline.

• The availability of government resources for development and welfare programs.

• The impact of pension liabilities, especially for non-contributory pension schemes.

• The financial position of state governments, as many states follow the Centre’s pay commission recommendations.

• Comparative analysis of public sector and private sector salary structures and perks.

Fitment Factor: The Core of Salary Revision

One of the most significant elements in determining the salary hike will be the Fitment Factor, which acts as a multiplier applied to an employee’s current basic pay to calculate the revised pay.

According to early estimates, the fitment factor in the 8th Pay Commission may range between 1.8 and 2.57. Depending on which figure is adopted, the salary hikes could vary substantially across levels.

Here’s a projection of possible salary increases under different fitment factor scenarios:

If the Fitment Factor is 1.8

• Level 1 (Basic Pay ₹18,000) → ₹32,400

• Level 2 (Basic Pay ₹19,900) → ₹35,820

• Level 3 (Basic Pay ₹21,700) → ₹39,060

If the Fitment Factor is 2.46

• Level 1 → ₹44,280

• Level 2 → ₹48,954

• Level 3 → ₹53,382

If the Fitment Factor is 2.57

• Level 1 → ₹46,260

• Level 2 → ₹51,143

• Level 3 → ₹55,769

This means central government employees could see their basic pay increase by 80% to 157% once the new pay scales are implemented.

Revision in Allowances

Once the 8th Pay Commission’s recommendations come into effect, Dearness Allowance (DA) will be merged into the new basic pay. In addition, House Rent Allowance (HRA) and Travel Allowance (TA) will be recalculated based on the revised salary slabs. These changes will further enhance the overall compensation for government employees.

Pension Reforms for Retirees

The 8th Pay Commission is also expected to bring significant relief for pensioners. The pension amount will be revised upward, and there will be a renewed focus on parity in pension payments to ensure uniformity among retirees. The system for pension disbursement will also be streamlined for timely payments and easier processing.

New Pay Matrix to Simplify Salary Structure

A revised Pay Matrix will be introduced under the new commission. This matrix will simplify the understanding of pay grades, increments, and career progression. It will help employees clearly see their potential earnings and future increments based on experience and performance.

Expected Impact by 2027

If the recommendations are implemented on time, central government employees could start receiving the revised salaries by mid or late 2027. The decision is expected to boost consumer spending and overall morale among government workers, giving a positive push to the economy as well.

With the formation of the 8th Pay Commission, the government aims to strike a balance between fiscal responsibility and employee welfare, ensuring fair compensation that reflects the cost of living and rising inflation trends.