The Union Cabinet has approved the formation of the 8th Pay Commission, setting the stage for a potential increase in the minimum basic salary of central government employees to exceed Rs 40,000 per month. The commission’s recommendations are expected to take effect from January 1, 2026, aligning with the conclusion of the 7th Pay Commission’s term.
Neeti Sharma, CEO of TeamLease Digital, highlighted the possible changes under the 8th Pay Commission. “A fitment factor between 2.6 and 2.85 is speculated, potentially increasing salaries by 25-30 per cent and pensions proportionately. The basic minimum salary is expected to rise beyond Rs 40,000, along with perks, allowances, and performance pay,” she said. However, these figures are preliminary, with official details expected once the commission submits its report later this year.
Under the existing 7th Pay Commission, central government employees receive a minimum basic salary of Rs 18,000 per month, which was an increase from Rs 7,000 under the 6th Pay Commission. When combined with allowances such as Dearness Allowance (DA), House Rent Allowance (HRA), and Travel Allowance (TA), the minimum monthly salary currently reaches Rs 36,020. The 7th Pay Commission’s implementation in 2016 introduced a fitment factor of 2.57, leading to an average salary hike of 23.55 per cent.
The 8th Pay Commission’s proposed fitment factor of 2.6 to 2.85 aims to address inflation, rising living costs, and disparities between public and private sector wages. Experts believe the revisions will enhance disposable incomes, spur consumption, and positively impact the broader economy.
Union Information and Broadcasting Minister Ashwini Vaishnaw emphasized the significance of constituting the 8th Pay Commission well in advance. “The last Pay Commission began in 2016, and its term will conclude in 2026. The establishment of the 8th Pay Commission in 2025 ensures sufficient time for recommendations to be implemented before the 7th Pay Commission period ends,” he said. Vaishnaw also confirmed that the chairman and two members of the commission would be appointed shortly.
Pay commissions are typically constituted every decade to ensure government salaries and pensions remain competitive. The 7th Pay Commission was established in 2014, with its recommendations implemented from January 2016, ten years after the 6th Pay Commission’s implementation.
Experts note that the salary and pension revisions under the 8th Pay Commission are crucial to maintaining economic stability. “Such revisions reflect the government’s commitment to a fair and equitable system that values its workforce and ensures they are financially empowered,” Sharma added.
Aditi Nayar, Chief Economist at ICRA Ltd, stated that while the 8th Pay Commission’s recommendations are unlikely to affect fiscal metrics in FY2026, their impact should be factored into the government’s medium-term fiscal consolidation plans and the Finance Commission’s recommendations. The 7th Pay Commission’s implementation led to an additional expenditure of Rs 1 lakh crore for FY 2016-17. The 8th Pay Commission’s deliberations are anticipated to address the evolving economic realities of inflation and living costs while ensuring the government workforce remains adequately compensated for their contributions. The recommendations will play a pivotal role in shaping fiscal policies and employee benefits for the next decade.
