The Union Cabinet chaired by Prime Minister Narendra Modi on Tuesday approved the terms of reference for the Eighth Pay Commission, setting in motion the process for increasing the salaries and pensions of nearly 12 million central government employees and pensioners with effect from January 1, 2026.
To be sure, the panel will take time to make its recommendations -- it has to do so within 18 months of its constitution -- which means the increases will likely be with retrospective effect. “The specific date will be decided once the interim report comes in...But, mostly it should be January 1, 2026,” I&B Minister Ashwini Vaishnaw said at a press briefing on Tuesday, responding to a question on the date of implementation of the pay panel’s recommendations.
The panel will be headed by retired Supreme Court judge Ranjana Prakash Desai. It will have IIM (Bangalore) Professor Pulak Ghosh as a part-time member while Petroleum Secretary Pankaj Jain will be the member secretary.
The 7th Pay Commission recommended an increase of 23.55% in the salaries and allowances of government employees, with the change coming into effect from January 1, 2016. It also recommended a 24% increase in pensions with a 3% annual increment.
The Pay Commission’s recommendations are highly anticipated and closely tracked — also because many state governments follow it for their own employees. The 8th Pay Commission’s recommendation on the so-called fitment factor (a multiple which is arrived at subjectively, and then applied on the existing salary) will be closely watched -- the 7th Pay Commission arrived at a fitment factor of 2.57 — but what will also be are its efforts to make government salaries and pensions competitive and equitable. The Pay Commission’s recommendations also apply to armed forces personnel and pensioners.
While making recommendations, the commission will keep in view the “economic conditions in the country and the need for fiscal prudence,” the finance ministry said in a statement. It will also consider the prevailing salary structures and working conditions of private sector employees, it added.
{{/usCountry}}While making recommendations, the commission will keep in view the “economic conditions in the country and the need for fiscal prudence,” the finance ministry said in a statement. It will also consider the prevailing salary structures and working conditions of private sector employees, it added.
{{/usCountry}}According to the statement, the panel will also ensure that adequate resources are available for developmental expenditure and welfare measures, and assess the unfunded cost of non-contributory pension schemes and the likely impact of the recommendations on the finances of the state governments, which usually adopt its recommendations with some modifications.
The commission will make its recommendations within 18 months of the date of its constitution and may consider, “if necessary, sending interim reports on any of the matters as and when the recommendations are finalized”, the finance ministry’s statement said.
The cabinet announced the constitution of the Eighth Central Pay Commission on January 16 to recommend salary revisions for around 5 million central government employees and 6.9 million pensioners including defence personnel.
Central Pay Commissions have been periodically constituted since 1947 to go into various issues related to the salaries, retirement benefits and other service conditions of central government employees and to make recommendations on the required changes. Several states and their agencies often follow recommendations of the commission.
The 7th Pay Commission was constituted in February 28, 2014, it submitted its report on November 19, 2015 and the Cabinet approved most of its recommendations on June 29, 2016. Its chairman was Justice Ashok Kumar Mathur and the two full-time members were Vivek Rae and Rathin Roy.
As per the estimation made by the 7th Central Pay Commission, the financial impact of its recommendations was ₹1,02,100 crore in FY 2016-17.Recommendations on pay and pension were implemented from January 1, 2016. Those on allowances were implemented later with some modifications based on suggestions of another panel led by the then finance secretary Ashok Lavasa. The revised allowances came into effect from July 1, 2017.
The Central Secretariat Service Forum (CSS Forum) expressed its “sincere gratitude to the Hon’ble Prime Minister Shri Narendra Modi and the Union Cabinet” for approving the terms of reference. “The CSS Forum had consistently raised the demand for the constitution of the 8th Central Pay Commission through various representations and forums to ensure a timely review of pay structure, service conditions, and pensionary benefits of Central Government employees. Today’s decision reflects the Government’s sensitive and responsive approach towards the welfare of its workforce,” it added.
The Forum hopes, and “will continue to actively pursue” that the benefits of the 8th Central Pay Commission are “implemented with effect from 1st January 2026” for all central government employees, it added.