8th Pay Commission: Family Unit Formula Change Could Drive Major Pay Hikes - Check Details

The demand is said to have received support from several central government employee and pensioner associations.

During the 7th Pay Commission, the government granted a growth factor of 15 per cent. Assuming the same growth level, the calculations change significantly.

Source : pexels.com

Show Quick Read

Key points generated by AI, verified by newsroom

• Employee unions propose increasing family units for pay calculations.
• This change could potentially increase the fitment factor above 3.
• Current calculation bases family unit on parents, spouse, two children.

At last month’s National Council (Staff Side), Joint Consultative Machinery (NC-JCM) meeting, a proposal was made to increase the number of family units considered in salary calculations from three to five. The move could influence pay revisions under the 8th Pay Commission.

It has been argued that if the government accepts the proposal, the fitment factor used for revising basic salaries could exceed 3, potentially leading to significant salary increases for employees.

Demand Backed By Employee And Pensioner Associations

The demand is said to have received support from several central government employee and pensioner associations. They believe that expanding the family unit size from three to five could raise the fitment factor that ultimately determines the extent of salary increases under the pay commission.

Origins Of The Three-Unit Family Concept

The concept of three family units was introduced during the 15th Indian Labour Conference (ILC) in 1957, when discussions were held on need-based norms for fixing wages, according to the expert committee report.

Under this framework, a family unit comprises a husband, wife and two children. These units are considered while calculating basic wages under a pay commission.

Employee Bodies Seek Inclusion Of Parents

Employee associations argue that the current system does not reflect present social and legal realities, the Economic Times reported.

C Srikumar, secretary general of the All India Defence Employees' Federation (AIDEF), said the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 makes it a legal responsibility for children to support their parents, NDTV Profit reported. According to him, this is why AIDEF has sought the addition of two more family units.

Manjeet Singh Patel, National President of the All India NPS Employees Federation, also highlighted that nuclear families are increasingly common. As a result, elderly parents are more dependent on their children, which is why employee bodies want parents included as family units.

What To Expect?

Patel told the Economic Times that the basic pay could rise by 66 per cent if family units increase from three to five. This would translate into an additional fitment factor of 0.66.

The 66 per cent increase is based on a 33.33 per cent calculation per family unit.

Scenario 1: No Change In Family Units

In the first scenario, calculations assume no change in family units and consider only dearness allowance (DA) increases and annual increments.

If an employee’s basic salary is Rs 78,800, current DA is 58 per cent, annual increments are 12 per cent and the estimated DA rise is 12 per cent, the fitment factor would be calculated as:
1 (basic pay) + 0.66 (DA) + 0.12 (annual increment) = 1.76.

In this case, the estimated revised basic salary could be Rs 1,38,688.

Scenario 2: Family Units Increase From 3 To 5

In the second scenario, family units increase from three to five. The additional family unit factor of 0.66 is added to the base fitment factor from the first scenario.

This results in a total fitment factor of 1.76 + 0.66 = 2.42.

Under this scenario, the estimated revised basic salary would be calculated as:
78,800 × 2.42 = Rs 1,90,676.

Scenario 3: With Growth Factor Similar To 7th Pay Commission

During the 7th Pay Commission, the government granted a growth factor of 15 per cent. Assuming the same growth level, the calculations change significantly.

The steps include:

• Rs 78,800 basic pay at a 1.76 fitment factor = Rs 1,38,688
• Per family unit (for three units) = Rs 46,230
• Revised salary for five family units = 5 × Rs 46,230 = Rs 2,31,150
• Derived fitment factor = 2.94

Adding a 15 per cent growth factor increases it to 2.94 + 0.15 = 3.09.

This means the estimated revised salary would be calculated as:
78,800 × 3.09 = Rs 2,43,492.