8th Pay Commission: The central government employees as well as the pensioners are eagerly waiting for the Terms of Reference (ToR) to be decided and the panel formed. This touches an estimate of 1.2 crore employees. The ToR will outline how the salaries and pensions are to be reviewed and revised, sepecifying details to achieve the purpose. As stated by our source, Financial Express, it was anticipated that the next pay commission will hold office from January 1, 2026. It now seems impossible to keep this deadline as not much work has been done on finalizing the ToR and the appointment of key members.In the recent report published by Ambit Capital, it was mentioned that the central government employees and the pensioners would see an increase of 34% in their salary with the 8th Pay Commission. The report was also positive on the implementation of these recommendations claiming that not only would there be a significant increase in the earnings of employees but a massive increase in the spending of the country would be observed.According to the brokerage report, “the 7th pay commission (January 2016 – December 2025) implemented a nominal increase of 14% (the lowest increase since 1970).” The report states that “the 8th Pay Commission is expected to announce a 30-34% increase in salary and pension to 1.1 crore beneficiaries for the purposes of driving consumption.” What do you think the fitment factor would be under the 8th Pay Commission? As per Ambit Capital’s report, the fitment factor for the 8th Pay Commission is estimated to be between 1.83 to 2.46 which means that new salary will be computed on the basis of multiplying the existing basic salary of the employees by this figure. To give an example, in the 7th Pay Commission this factor was set at 2.57 which resulted in a rise of the minimum basic salary from Rs 7,000 to Rs 18,000. However, after a reset of the dearness allowance (DA) the actual increase was only 14.3%. Are there any possible dates for the implementation of the new pay commission? While the government seems to have announced the 8th Pay Commission, its terms of reference (ToR) alongside appointing the chairman and members has yet to be defined. As of now, it adds uncertainty as to the feasibility of targeting January 2026 as the implementation date.The 7th Pay Commission is stated to have taken 18-24 months for implementation as per the Ambit report. As a result, should the process be further held up, this commission may be active by FY 2027 (FY 2026-27). Treatment for pensioners Based on the Ambit report, pensioners will receive an adjustment to their basic pay along with an increase in the dearness allowance (DA) as well. Since they do not qualify for HRA or any other allowances, they are likely to receive smaller increases relative to their former pay. As stated in the report, under the Unified Pension Scheme (UPS) 50% of the final salary would be treated as the base salary and is guaranteed from FY 2026. This revised pension scheme is a new UPS that came into force in April 2025, replacing the National Pension Scheme (NPS). What impact will the 8th Pay Commission have on government expenditure? According to the latest Ambit Capital estimates, the 30-34% increase in salary and pension will increase Government expenditure by an additional Rs 1.3 to 1.8 lakh crore and thus impacting GDP by 30-50 basis points. Moreover, the report predicts this will accelerate consumption in the country and positively impact FMCG, BFSI, retail and automobile sectors.Why is a pay commission necessary? To ensure the government employees remuneration is in sync with the private sector, a new pay commission is set up every decade. This is important for retention of skilled workers in government services. According to reports from Ambit, this commission will revise the economic structure of remuneration but will also enhance the wage structure. This, in turn, will propel the economic activities of the nation. Currently, the anticipation is on the central government’s official statement and the commission's terms of reference. An expedited process could provide over 1 crore employees and pensioners with timely relief in terms of revised salary and pension.
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