The Union Cabinet has approved the Terms of Reference for the 8th Central Pay Commission (CPC), marking a significant development for Central Government employees and pensioners. Justice Ranjana Prakash Desai, former Supreme Court judge, has been appointed as Chairperson, while Professor Pulak Ghosh from IIM Bangalore will serve as part-time member. The commission's recommendations will impact approximately 50 lakh Central Government employees, including Defence Services Personnel, and 69 lakh pensioners.

8th Pay Commission Structure and Timeline

The 8th Central Pay Commission will function as a temporary body with three key positions. The commission structure includes specific appointments across leadership roles.

The government has mandated that the 8th Pay Commission submit its recommendations within 18 months. Based on historical implementation patterns, the provisions are expected to come into force from January 1, 2026, following the conclusion of the 7th Pay Commission's tenure.

Current 7th Pay Commission Structure

Central Government employees currently operate under the 7th Pay Commission, which was constituted in 2014 and implemented from 2016. The existing salary structure establishes clear minimum and maximum thresholds for different employee categories.

The 7th Pay Commission delivered an actual salary increase of 14.30% including Dearness Allowance (DA), representing a moderate adjustment compared to previous commissions.

Historical Pay Commission Analysis

Pay Commissions have been established approximately every ten years since 1946, addressing factors such as cost of living, inflation, and economic conditions. The salary progression from the 1st to 7th Pay Commission demonstrates significant evolution in government compensation structures.

The 6th Pay Commission recorded the highest salary increase at 54%, while the 2nd and 7th Pay Commissions showed more conservative increases at 14.20% and 14.30% respectively.

Salary Calculation Methodology

Pay Commissions utilize the fitment factor as a primary metric for determining salary and pension revisions. The basic formula for calculating revised salaries follows a standardized approach: Revised Salary = Basic Pay × Fitment Factor.

The government may consider adopting the Aykroyd formula, developed by Dr Wallace Aykroyd, for wage calculations. This formula estimates ideal salary based on minimum cost of living, focusing on nutritional requirements of average workers and essential costs including food, clothing, and housing.

Implementation Timeline and Impact

The 8th Pay Commission formation follows the typical ten-year cycle, with the 7th Pay Commission's tenure concluding. Historical implementation shows that the 7th Pay Commission's recommendations were approved within six months and came into effect from January 1, 2016. If similar timelines apply, the 8th Pay Commission implementation is likely around 24 months from the current announcement.

The commission's recommendations will address comprehensive aspects of government employment, including salary structures, pension benefits, and various allowances. This systematic review ensures that Central Government compensation remains aligned with economic conditions and cost of living adjustments.

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With the 8th Central Pay Commission recommendations expected to benefit central government employees from January 1, 2026, attention has turned to when state government employees might see similar salary revisions and what fitment factors they can expect.

Implementation Timeline for State Employees

State governments operate without statutory deadlines for adopting Central Pay Commission recommendations, creating variability in implementation schedules. According to Ramachandran Krishnamoorthy, Director of Payroll Services at Nexdigm, the timeline varies significantly across states.

Many states constitute their own pay commissions to assess fiscal impact and recommend suitable modifications before implementation. This process contributes to the extended timelines observed across different states.

State-Specific Variations

States demonstrate considerable autonomy in structuring their pay commission cycles. In Uttar Pradesh, the 7th Pay Commission term ended on December 31, 2025, aligning with the Central Pay Commission timeline. This alignment means state employees could be eligible for arrears from January 1.

However, alignment with central timelines is not mandatory. Kerala has constituted its 11th Pay Commission for salary revision, while Karnataka operates under its 7th Pay Commission, illustrating the independent approach states take toward pay revisions.

Expected Fitment Factors

Salary revisions depend on fitment factors determined in relation to inflation rates. The 7th Central Pay Commission established a fitment factor of 2.57, multiplying existing basic wages by this amount to determine new salaries effective from January 1, 2016.

While Uttar Pradesh adopted the same fitment factor as the central government, Punjab implemented a slightly higher multiplication unit of 2.59, demonstrating how states can modify recommendations based on local considerations.

Arrears and Implementation Benefits

Employees and pensioners receive arrears covering the entire period between the effective date and actual implementation date. This provision ensures that beneficiaries receive retroactive compensation for the gap between recommendation approval and actual salary revision implementation.

The variation in state implementation approaches reflects the balance between following central guidelines and addressing state-specific fiscal constraints and administrative requirements.