8th Pay Commission: Why can the 8th Pay Commission trouble government employees and pensioners?

Over 33 lakh central government employees and over 66 lakh pensioners, who are eagerly waiting for the implementation of the 8th Pay Commission, may be a little disappointed if they are expecting a substantial hike in their salaries and pensions. According to a recent report by Kotak Institutional Equities, the fitment factor for the 8th Pay Commission could be as low as 1.8, resulting in a real salary hike of only around 13 per cent.

An earlier report by Ambit Capital had pointed out that the current 7th Pay Commission, which will end in December 2025, has effectively resulted in a salary hike of 14.3 per cent since 2016, excluding allowances, which is still higher than the hike expected for the upcoming 8th Pay Commission. Let's try to understand why the 8th Pay Commission may not lead to a significant hike in the salaries of central government employees and pensioners, and when it is likely to be implemented.

How does the fitment factor affect salary and pension?

Kotak Institutional Equities' report titled “8th Pay Commission: One-time hike… after some time” expects a fitment factor of around 1.8. The actual increase in the salary or pension of central government employees depends entirely on this ‘fitment factor’ or multiple factors recommended by the commission.

The fitment factor is used to calculate an employee's new basic salary based on his or her existing basic salary. For example, the 7th Pay Commission had prescribed a fitment factor of 2.57, which increased the monthly minimum basic salary of central government employees from Rs 7,000 to Rs 18,000.

However, it is important to understand that a fitment factor of 2.57 does not mean that the total salary will increase by 2.57 times. This fitment factor applies only to the basic salary, thereby increasing it. He says employee unions, especially the employee side of the National Council-JCM, have formally opposed the proposed cut, saying such a move would be inequitable and demoralising, especially in the face of rising inflation.

What goes into a central government employee's salary?

A government employee has a few key factors. Basic salary is the main component of the salary to which the fitment factor applies. DA or dearness allowance is a biennial adjustment announced by the government to help employees mitigate the impact of inflation on their total income. It is revised every year in January and July. After the January 2025 announcement, the DA is currently 55 per cent of the basic pay.

So, assuming an employee's basic salary is Rs 20,000 per month, their DA will be Rs 11,000. House Rent Allowance: One per cent of the basic salary is also set aside for HRA (House Rent Allowance), which covers rental expenses and transport allowance. This amount is a fixed amount depending on your pay scale and your city.

When is the 8th Pay Commission likely to be implemented?
The process began with the announcement of the 8th Central Pay Commission in January 2025, but there has been no progress in appointing its chairman and defining its scope. The Kotak report states that the usual procedure is to constitute a Central Pay Commission (CPC), which will hold consultations with central and state government officials, representatives of employee organizations and pensioners, experts, etc. After consultations, the Central Pay Commission (CPC) will submit its report and recommendations to the government. The government will seek Cabinet approval to implement the recommendations. Despite the delay, the 8th Pay Commission recommendations will be effective from January 2026. Therefore, the greater the delay in implementing the recommendations, the greater will be the outstanding payments to central government employees and pensioners.

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