The Modi government has officially approved the Terms of Reference (ToR) for the 8th Central Pay Commission, marking a significant step toward revising the pay structure of millions of central government employees and pensioners. The new commission will play a vital role in determining salary hikes, allowances, and pension revisions that could impact the financial lives of over 1.15 crore beneficiaries across India.

According to the Cabinet’s decision, the 8th Pay Commission will function as a temporary body, consisting of one Chairperson, one part-time member, and one member-secretary. The commission has been directed to submit its recommendations within 18 months from the date of its formation. It also has the option to submit interim reports if needed, ensuring flexibility in the process.

What Will Change: Salary Hike Expectations

The biggest gain for central government employees under the 8th Pay Commission will be an increase in the basic pay. The commission will review the Fitment Factor, which directly influences the overall salary structure. This factor determines the extent of increase in the basic pay component after implementation.

While the new fitment factor has not been finalized yet, past data provides some insight. The 7th Pay Commission had set the fitment factor at 2.57x, meaning basic pay was multiplied by 2.57 to arrive at the new pay. Experts believe the 8th Pay Commission may recommend a fitment factor between 1.92x and 2.46x, depending on inflation, fiscal conditions, and overall pay rationalization.

For example:

• If an employee currently earns a basic salary of ₹18,000, and the fitment factor is 1.92x, the revised basic pay could become ₹34,560.

• If the factor is 2.46x, the same employee could receive an increased ₹44,280 as basic pay.

Below is an approximate salary comparison table (based on 1.92x):

This structure indicates a near doubling of salaries, benefiting employees across all pay levels.

Other Recommendations Expected

Apart from the salary hike, the 8th Pay Commission is also likely to review the structure of allowances such as Dearness Allowance (DA), House Rent Allowance (HRA), and Travel Allowance (TA). These allowances may be recalibrated to align with current economic realities, inflation rates, and cost-of-living variations across cities.

Additionally, the commission may explore revisions in pension formulas, ensuring that the country’s 65 lakh pensioners receive proportional benefits once the new recommendations are implemented.

When Will the New Pay Be Effective?

While employees are eager to know the exact date of implementation, it appears that the 8th Pay Commission’s recommendations will not take effect immediately. Given the 18-month time frame for report submission, the final implementation is unlikely before mid-2027.

However, once approved, the revised salaries will be retrospectively applicable from January 1, 2026. This means employees and pensioners will receive arrears for the period between January 2026 and the actual implementation date — a move expected to provide a substantial one-time financial boost.

How Many Will Benefit?

The 8th Pay Commission will directly impact around 50 lakh central government employees and 65 lakh pensioners, covering staff from ministries, defense, railways, and other departments. The decision is also expected to influence state governments and public sector undertakings (PSUs), as they often align their pay revisions with the central structure.

Final Take

The approval of the 8th Pay Commission signals a major step toward enhancing the income and living standards of India’s government workforce. Though implementation may take time, the anticipated rise in basic pay and allowances will bring significant financial relief and stimulate broader economic activity through increased consumer spending.

For now, all eyes are on the commission’s report, which will shape the future of government pay scales for the next decade.