8th Pay Commission to Set Terms of Reference Soon: Major Salary Hikes, DA Merger, and Policy Overhaul Expected
New Delhi | In a significant development for government employees and pensioners, the Modi Cabinet has announced the formation of the 8th Pay Commission, which is set to revise salaries, pensions, and allowances for approximately 49 lakh Central government employees and nearly 68 lakh pensioners. With the 7th Pay Commission’s tenure concluding in 2026, the government is expected to outline the terms of reference for the new panel soon.
What to Expect from the 8th Pay Commission?
The commission’s recommendations, likely to be submitted by early next year, will play a crucial role in determining future pay structures. Though official details are yet to be released, reports suggest the government is considering multiple revisions, including eliminating outdated allowances, introducing new benefits, and restructuring pay scales.
Among the most anticipated changes is a proposed increase in the minimum basic salary from ₹18,000 to ₹51,480, a significant jump that could impact millions of government employees. Additionally, discussions around merging the Dearness Allowance (DA) into the basic salary have gained momentum, with employees demanding interim relief until the final recommendations come into effect.
Understanding the Pay Commission’s Role
A Pay Commission is a government-appointed committee responsible for reviewing and recommending changes to the pay structure of government employees and pensioners. Established roughly every ten years, it consists of a chairman, members, and a secretary, typically comprising financial experts, economists, and retired senior officials.
The 7th Pay Commission, chaired by Justice Ashok Kumar Mathur, played a pivotal role in revising government salaries. The 8th Pay Commission is expected to be led by a high-ranking finance expert or a retired judge, with the government finalizing the framework and panel members before April 2025.
Key Focus Areas of the 8th Pay Commission
1. Pay and Allowances Restructuring
The government is not only looking at salary revisions but also considering modifications to the Modified Assured Career Progression (MACP) scheme. If approved, this could ensure a minimum of five promotions for central government employees during their careers.
2. DA Merger and Interim Relief
There has been long-standing demand for the inclusion of DA into the basic salary structure. Reports suggest that the government is likely to approve this change, easing inflation-related burdens on employees. Additionally, interim relief might be provided until the commission’s final recommendations are implemented.
3. Increased Family Unit Considerations
Another potential shift in policy is the revision of the ‘family unit’ standard used in salary calculations. The current framework considers three family members per household; however, the 8th Pay Commission may expand this to five, reflecting changing economic realities.
4. Expected Salary Hike
Reports indicate that the fitment factor—a key determinant in salary calculations—could rise from 2.57 to 2.86. If implemented, this would elevate the minimum basic pay at Level 1 from ₹18,000 to ₹51,480, leading to substantial hikes across all ten levels of government employment.
Historical Context of Pay Commissions
Since India’s independence, pay commissions have played a crucial role in shaping the financial well-being of government employees. Each commission has addressed economic challenges and inflationary trends, ensuring government salaries remain competitive.
Who Will Benefit from the 8th Pay Commission?
The revision will impact nearly 49 lakh Central government employees, including defense personnel, as well as approximately 68 lakh pensioners. The financial implications of these revisions will be addressed in the 2026-27 Union Budget, according to Expenditure Secretary Manoj Govil.
As anticipation builds, government employees and pensioners eagerly await the final terms of reference for the 8th Pay Commission. With potential salary hikes, DA mergers, and new policy changes on the horizon, this commission’s recommendations will significantly impact the financial landscape of India’s public sector workforce. The coming months will provide more clarity on the commission’s framework, leadership, and proposed reforms.
