8th Pay Commission: Can Government Salaries Really Jump By 34%? Check Here

The new pay commission is expected to directly benefit around 4.4 million central government employees and approximately 6.8 million pensioners, affecting a total of 11.2 million individuals

The new pay commission is expected to directly benefit around 4.4 million central government employees

Source : ABPLIVE AI

Government employees across India are eagerly awaiting the rollout of the 8th Pay Commission, expected to significantly revise salaries and pensions. According to a research report by brokerage firm Ambit Capital, central government employees and pensioners may witness a pay hike of 30-34 per cent once the recommendations are implemented.

While the implementation is tentatively scheduled for January 2026, the process involves multiple steps, including the formation of the commission, drafting of recommendations, submission to the government, and final approval. Currently, none of the details regarding the members, chairman, or terms of reference (ToR) of the 8th Pay Commission have been released.

The report from Ambit notes, "The 7th Pay Commission (January 2016 - December 2025) had implemented a modest salary hike of ~14 per cent (lowest since 1970). We expect the 8th Pay Commission to announce a hike of 30-34 per cent for salaries & pensions to cover ~11mn beneficiaries to boost consumption."

The new pay commission is expected to directly benefit around 4.4 million central government employees and approximately 6.8 million pensioners, affecting a total of 11.2 million individuals.

Fitment Factor To Play A Key Role

A crucial component in the pay revision is the fitment factor, used to calculate the new basic pay. During the 7th Pay Commission, the fitment factor was 2.57, increasing the basic pay from Rs 7,000 to Rs 18,000 per month. However, Ambit’s report suggests a possible fitment range between 1.83 and 2.46 this time.

The report also explains: "It is important to note that, even with a 2.57 fitment factor in the 7th Pay Commission, overall government salaries did not grow by 2.57x, only the base pay did."

How Government Compensation Is Structured

A government employee’s salary typically comprises Basic Pay, Dearness Allowance (DA), House Rent Allowance (HRA), Transport Allowance (TA), and other benefits. While DA adjusts for inflation and is recalculated twice a year, other components like HRA and TA vary based on location and job level.

In recent years, the share of basic pay has declined to nearly 50 per cent of the total salary package, as allowances have taken up a larger portion.

Pensioners will also benefit from the commission’s recommendations, particularly from the basic pay revision. While they do not receive HRA or TA, their pensions are calculated based on basic pay and DA. The DA is reset to zero once a new pay commission is implemented, as was the case with previous commissions.

Possible Delays In Implementation

Despite the projected rollout date of January 2026, analysts warn of potential delays. The 7th CPC, for instance, was announced in early 2014 and implemented two years later. As of mid-2025, the government has yet to form the 8th CPC, nor define its scope.

Internal sources suggest that if the commission is not announced soon, the pay revision may be pushed to late 2026 or early 2027, resulting in a backlog of arrears.

Fiscal Considerations May Influence Timeline

The government is also grappling with balancing fiscal priorities. Implementing a large-scale salary hike could significantly impact the fiscal deficit, especially when weighed against welfare programs and upcoming election expenditures. This financial pressure could further delay the rollout.

While the 6th Pay Commission (2006) implemented an approximate 54 per cent increase in compensation, the 7th CPC (2016) saw a relatively modest 14.3 per cent hike in basic pay. Analysts anticipate that the upcoming 8th CPC could align more closely with the higher end of historical pay revisions.