The Union Cabinet, led by Prime Minister Narendra Modi, has cleared the Terms of Reference (ToR) for the 8th Central Pay Commission.
Along with this approval, the government has officially notified the setting up of the commission.
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Once its recommendations are implemented, they are expected to impact nearly five crore central government employees, including defence staff, and around 6.9 crore pensioners across the country.
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Pay Commission Announced Earlier This Year
The decision to constitute the 8th Pay Commission was first announced by the government in January 2025.
The panel has been tasked with reviewing the existing pay structure, allowances, and service-related benefits of central government employees.
It has been given a timeline of 18 months to submit its report and will function as a temporary commission.
Three-Member Panel to Head the Review
As per details shared by the Ministry of Finance, the 8th Pay Commission will consist of three members. Former Supreme Court judge Justice Ranjana Prakash Desai has been appointed as the chairperson. Pulak Ghosh, a professor at IIM Bengaluru, will serve as a part-time member, while Pankaj Jain, Secretary in the Ministry of Petroleum and Natural Gas, has been named the member secretary.
Existing Pay Structure Under the 7th Pay Commission
Currently, central government employees and pensioners are paid under the recommendations of the 7th Pay Commission.
The minimum basic pay stands at Rs 18,000 per month, while the minimum basic pension is Rs 9,000.
The maximum basic salary is capped at Rs 2.25 lakh, going up to Rs 2.5 lakh for senior-most positions such as the Cabinet Secretary.
The fitment factor used in the 7th Pay Commission was 2.57.
Dearness Allowance Stands at 58%
At present, Dearness Allowance (DA) for employees and Dearness Relief (DR) for pensioners are set at 58%. A 3% increase in DA on the minimum basic salary of Rs 18,000 results in an additional Rs 540 per month.
Similarly, a 3% rise in DR adds Rs 270 to a minimum pension of Rs 9,000.
What Could Be the Fitment Factor in the 8th Pay Commission
Experts suggest that the fitment factor under the 8th Pay Commission may range from 1.8 to 2.86.
With a 1.8 fitment factor, the minimum basic salary could rise to Rs 32,400, while the minimum pension may increase to Rs 16,200.
If the factor is set at 2.0, the minimum salary could become Rs 36,000, and the pension Rs 18,000.
Bigger Gains If Higher Fitment Is Approved
In case the government approves a higher fitment factor:
At 2.57, the minimum basic salary may go up to Rs 46,260, and the minimum pension to Rs 23,130.
At the upper estimate of 2.86, salaries could touch Rs 51,480, while pensions may rise to Rs 25,740.
However, once the new pay commission comes into force, DA and DR are likely to be reset and recalculated afresh under the revised pay structure.
How Salary Revision Is Calculated
Salary revisions are calculated using a simple formula: Revised Pay = Existing Basic Pay × Fitment Factor
The government may also examine the Aykroyd Formula, which determines wages based on the minimum cost of living required to maintain a reasonable standard of living.
Employee Unions Raise Concerns
Meanwhile, employee unions have raised objections, stating that pension revision has not been clearly addressed in the approved Terms of Reference.
They are also pressing for the merger of DA with basic pay and have cautioned that unresolved issues could lead to nationwide protests.