There is an important news for central government employees and pensioners. The government has finally started the process of implementing the 8th Pay Commission. The Cabinet has recently approved the Terms of Reference (ToR). This means that the way for salary hike, dearness allowance (DA) increase and pension increase has officially opened. About 50 lakh employees and 65 lakh pensioners across the country will get direct benefits.
When will the new salary and pension system be implemented?
The government has given the commission a deadline of 18 months to submit its report. It is believed that if everything remains on schedule, the new salary system can be implemented from January 1, 2026. This means that the new salary and pension rates will be considered effective from January 1, even if payments start a little late. In such a situation, employees and pensioners will also get the benefit of arrears.
What is fitment factor and why is this formula important?
Pay and pension increases in the Pay Commission are calculated using a formula called Fitment Factor. Simply put, it is a “multiplier” that is used to determine the new basic pay or pension by multiplying the old pay or pension.
Significant increase in both pension and salary
The fitment factor in the Seventh Pay Commission was 2.57. This means that someone with a basic salary of ₹10,000 will have a new basic salary of ₹25,700. If this factor becomes 3 or more in the Eighth Commission, both pension and salary will see a significant increase.
How can a pension of ₹25,000 become ₹50,000?
Suppose someone’s current basic pension is ₹25,000. If the government increases the fitment factor to 2.0, the pension will directly increase to ₹50,000. That means the pension will almost double.
If one’s old basic salary is ₹40,000, the calculation will be as follows:
With a fitment factor of 2.57, the new basic pay will be ₹1,02,800, and pension (50%) will be ₹51,400.
If the fitment factor is set to 3, the new basic pay will be ₹1,20,000 and pension will be ₹60,000.
If the fitment factor is 3.68, the pension can reach ₹73,600
This means that the higher the fitment factor, the greater will be the increase in pension.
Dearness Relief will also have an impact
When the basic pension increases, the amount of Dearness Relief (DR) also automatically increases. For example, if the old pension is ₹20,000 and DR is 20%, the amount received will be ₹4,000. However, if the pension increases to ₹30,000, the DR will become ₹6,000. This means the new pension will provide even better protection against inflation.
Employees’ salaries will also be affected.
This will have a direct impact on the salaries of pensioners as well as central government employees. If the fitment factor becomes 2.86, the basic salary of ₹25,000 may increase to ₹71,500, and the total salary (including DA and HRA) may exceed ₹90,000. The Eighth Pay Commission is headed by former Supreme Court judge Justice Ranjana Prakash Desai. Professor Pulak Ghosh is associated with them as a part-time member and Pankaj Jain is the Secretary. The commission has been given 18 months to prepare its report, after which the government will present it to the Cabinet. The new salary and pension system will be implemented as soon as it is approved.
Pensioners hope for relief from these issues also
According to an ET report, Manjit Singh Patel, president of the All India NPS Employees Federation, says that apart from the fitment factor, the government should also focus on some key demands, such as reducing the 40% pension commutation period from 15 years to 12 years and increasing medical assistance under CGHS. He says the medical allowance of ₹3,000 for elderly pensioners is too low, it should be increased to ₹20,000.