The Union Cabinet chaired by Prime Minister Narendra Modi has approved the Terms of Reference (ToR) of the 8th Pay Commission. This decision has brought great relief to more than 1 crore government employees and pensioners, who were waiting for this announcement for the last 10 months. The government officially approved it on Tuesday, October 28.
What are the Terms of Reference (ToR)?
The terms of reference are the framework on which the Pay Commission formulates its recommendations—that is, the Commission decides the amount of increase in basic pay, allowances and pension. The government has clarified that while formulating its recommendations, the Commission will keep in mind the country’s financial position, fiscal management and ability to spend on development and welfare schemes. After the implementation of the 8th Pay Commission recommendations, the following employees will benefit: permanent and temporary employees of the Central Government, employees of the Ministry of Defense and Armed Forces, employees and pensioners of Railways, Department of Posts and Central Armed Police Forces (CAPF).
How much will the salary increase?
The basis of salary increase will be the fitment factor. In the Seventh Pay Commission this factor was fixed at 2.57x. For example, if an employee’s basic salary was ₹20,000, the new salary would be: ₹20,000 × 2.57 = ₹51,400. If the government increases the fitment factor further this time (for example, to 3.0x or 3.5x), an even higher increase in salaries is possible.
Let us understand with an example: How much will the salary increase?
Suppose an employee is in a level 4 position. As per the current salary structure, his basic salary is ₹29,200. Currently the Dearness Allowance (DA) is 55%, and HRA is added at 27%.
The current salary calculation will be as follows:
Basic Salary: ₹29,200
Dearness Allowance (55%): ₹16,060
Dearness Allowance (27%): ₹7,884
Total salary = ₹53,144
Suppose the fitment factor is fixed at 2.0 in the 8th Pay Commission. In such a situation, the new pay scale will be calculated as follows:
After new salary:
Basic Salary: ₹29,200 × 2 = ₹58,400
Dearness Allowance: Nil (as Dearness Allowance is adjusted in the new basic pay)
HRA (27%): ₹15,768
Total salary = ₹74,168
This means that after the implementation of the 8th Pay Commission, the salary of a Level-4 employee will increase from ₹53,144 to ₹74,168. That means an increase of about ₹ 21,000 per month is possible.
When will the 8th Pay Commission be implemented?
According to the government, the recommendations of the 8th Pay Commission will come into effect from January 2026. However, the commission has been given 18 months to submit its report. Therefore, there are chances that this pay revision may be implemented by 2027 or 2028. About 10 months ago, Union Minister Ashwini Vaishnav had announced the formation of the 8th Pay Commission. He had said that this commission will review the salaries, pensions and allowances of government employees and revise them as per the current economic scenario.
