8th Pay Commission: There’s a important update for roughly 50 lakh employees and 65 lakh pensioners of the central government. Previously, the employees were anticipating the minimum basic pay of Rs 18,000 to surge to Rs 51,0000. However, the new report suggests that the basic pay will increase far lesser than that. With the 8th Pay Commission, employees wages can increase by a 13% on average. Earlier, there were expectations that the minimum basic wage could increase three fold, but the new report suggests otherwise. Nonetheless, there is a silver lining, and that is a full lack of relief since its implementation can only be done sometime between the end of 2026 to early 2027.How much is the lowest wage anticipated to grow?As per the Kotak Institutional Equities report, the fitment factor is projected to be 1.8 for the 8th Pay Commission. This suggests that the minimum wage can calculated to be increased from the current Rs 18,000 to Rs 30,000 per month. Previously, there were speculations about the rise being upto Rs 51,000. Such wage estimates can leave many employees astounded.What is the fitment factor?The fitment factor is a multiplier that assists in changing a value, in this context, a salary value, into a new predetermined pay grade. An example of this would be in the 7th Pay Commission where many employees benefitted from a salary increase due to a multiplier increase to 2.57.Why is there a holdup in executing this?As per the report, the government plans to launch the 8th Pay Commission in January 2025, but as of now, the ToR and the commission’s members have yet to be finalized. In Kotak’s view, it is likely to take about one and a half years till the report comes and an additional 3 to 9 months for the government’s approval and execution decision. What would be the additional expenditure?As per Kotak’s estimates, the estimated expenditure to be taken up by the government on the Pay Commission is set additional burden of 2.4 to 3.2 lakh crores, which is about 0.6 to 0.8 percent of the GDP. The most significant impact will be on Grade C employees, who form 90% of the central government employees.Effects on spending and savingsAs has been the case with prior pay commissions, there is likely to be an increase in spending on items such as automobiles and consumer goods (FMCG) products. Kotak mentions that this will increase the savings of the people. Additionally, an increase in salary is estimated to result in additional savings of Rs 1 to 1.5 lakh crores, which could be used to purchase stocks, deposit in banks, or buy physical assets. Preparation of the Finance Ministry On 21 July 2025, Minister of State for Finance Pankaj Chaudhary mentioned in Parliament that “work has started on the 8th Pay Commission”. The Ministry of Finance has invited suggestions from the Ministry of Defense, the Ministry of Home Affairs, the Department of Personnel, and the states. Waiting for the commission’s recommendations, the government’s approval, and subsequent implementation. New Pay Commission comes every 10 years The Government of India usually sets up a Pay Commission every decade which is intended to review and revise the salary and pension of the employees based on the prevailing inflation and expenditure levels. This comes after the implementation of the 7th Pay Commission in 2016.
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