The Union Cabinet, chaired by Prime Minister Narendra Modi, has formally approved the Terms of Reference (TOR) for the 8th Central Pay Commission, initiating a major overhaul of the pay structure for over 11.8 million central government employees and pensioners. This long-awaited move officially marks the beginning of the decennial revision of salaries, allowances, and pensions. The new pay scales are expected to be implemented retrospectively from January 1, 2026.
The Commission’s formation comes ten months after the Cabinet initially approved its formation. Information and Broadcasting Minister Ashwini Vaishnav confirmed that the Commission’s scope, composition, and timeline have been finalized. The Commission is scheduled to submit its comprehensive recommendations to the government within 18 months of its official formation. The panel will review the current salary structure, allowances, and pension formula, paying close attention to current economic conditions, the need for fiscal prudence, and the potential impact on state government finances, which typically adopt the Center’s recommendations.
What can be the fitment factor?
Although the 8th Pay Commission has not yet released its official pay structure, estimates suggest a significant salary increase for central government employees, potentially leading to a pay rise of ₹18,000 to ₹19,000 per month. This estimate is based on the assumption that the Commission may recommend a fitment factor of 2.86, a multiplier applied to the current basic pay. While the final factor has not yet been finalized, previous commissions have typically recommended a factor around 2.57 (7th Pay Commission).
How much increase is there on a salary of Rs 1 lakh?
- However, the final increase is likely to be directly linked to the central budgetary allocation for pay revision. For a mid-level employee currently earning a basic salary of ₹1 lakh per month, this increase could vary.
- 14% hike: If the government allocates Rs 1.75 lakh crore, the employee’s salary can increase to Rs 1.14 lakh per month.
- 16% hike: With an allocation of Rs 2 lakh crore, the salary could increase to Rs 1.16 lakh per month.
- Increase of 18% or more: If the allocation reaches Rs 2.25 lakh crore, the salary is expected to increase to Rs 1.18 lakh per month or more.
- Additionally, allowances like Dearness Allowance (DA), House Rent Allowance (HRA), and Travel Allowance (TA) will also be recalculated and increased.
