8th Pay Commission: The eighth pay panel is reported to be constituted in 2-3 weeks. The term of the Seventh Pay Commission ends on 31 December 2025.
8th Pay Commission: The central government had announced the formation of the Eighth Pay Commission in January 2025. Since then, the formation of the pay panel is awaited and now after several months of delay, the Center has expedited the process of finalizing the terms of reference (ToR) of the 8th Pay Commission. According to official sources, the ToR will be notified in two to three weeks and the name of the chairman and members of the panel will also be announced simultaneously.
The salary / pension of central government employees is revised every decade, taking into account many factors like economic condition, purchasing power, consumption pattern and prices.
The commission may be given at least a year to prepare its report after consultations with stakeholders, including the central government, public sector enterprises and state governments.
Given that the report will come out around mid-2026, pay/pension revision should be done retrospectively from January 1, 2026, and arrears paid to employees. The Central Pay Commission (CPC) is constituted once a decade.
An official said, “There has been sufficient progress on the ToR and members to be appointed for the 8th CPC. These are expected to be notified in the next 2-3 weeks.”
Last week, the department of expenditure had issued a vacancy circular to fill 35 posts on deputation basis in the 8th CPC.
When was the 7th CPC formed
Let us tell you that the 7th CPC was constituted on 28 February 2014. This CPC was headed by Justice Ashok Kumar Mathur and he was given 18 months to submit his report.
The 7th CPC, implemented on 1 January 2016, increased the salary (salary and allowances) of central government employees by 23.55% and the pension also increased by the same amount. The additional payment in FY 2017 was estimated to be Rs 1.02 lakh crore or 0.65% of GDP, making it difficult for the government to reduce the fiscal deficit from 3.9% in FY 2016 to 3.5% of GDP in FY 2017.
While the pay hike resulting from the pay panel can boost consumption at a large scale, its recommendations also put a heavy burden on state governments, PSUs and central universities, which take recommendations from commissions and make corresponding pay revisions.
Related to the 8th CPC, the potential impact will likely be built into the new medium-term fiscal consolidation as well as the recommendations of the 16th Finance Commission. The 16th Finance Commission will give its recommendations for the transfer of central taxes and grants to the states for five years starting from FY 2027.
Let us tell you that about 50 lakh central government employees (including security forces) will benefit from the eighth pay panel award. Apart from this, the pension of about 6.5 lakh pensioners (including security personnel) will also increase.
Lakhs of employees of states and UTS will also benefit because generally, state government employees get their salary hiked by the CPC award.
What was the fitment factor in the 7th Pay Commission
The 7th Pay Commission had proposed a new pay matrix replacing the existing pay bands and grade pay for the Centre’s 50 lakh employees and 54 lakh pensioners, including monthly starting salary and dearness allowance (DA). The starting salary was Rs 18,000 per month and the highest salary was Rs 2.5 lakh.
This was compared to the existing starting salary of Rs 7,000 per month and the highest salary of Rs 90,000 (fixed) excluding DA, which was 119% at the time. It also retained the annual increase of 3% and recommended a fitment factor of 2.57%, which will be applied uniformly.
The 8th CPC may also have to estimate a similar fitment factor keeping in mind the pace of CPI inflation during the intervening period.
For example, the growth in the Centre’s revenue expenditure in 2016-17 (the first year of the 7th CPC award) was 9.9% as against 4.8% the previous year. Such a growth in 2026-27 will also impact the fiscal space available for the Centre to increase its capital expenditure.
