The Union Cabinet has approved the Terms of Reference for the 8th Central Pay Commission (CPC), marking a significant development for nearly 50 lakh Central Government employees including Defence Services Personnel and 69 lakh pensioners. The commission will function as a temporary body to examine and recommend changes in salaries and other benefits for Central Government employees.

Commission Leadership and Structure

The 8th Pay Commission comprises three key positions with distinguished appointments:

Implementation Timeline

The Government announced the formation of the 8th CPC in January 2025, with the commission mandated to submit its recommendations within 18 months. Based on the 7th Pay Commission timeline, which saw recommendations approved within 6 months and implemented from January 1, 2016, the 8th Pay Commission is likely to be implemented approximately 24 months from now.

Current Salary Structure Under 7th Pay Commission

Central Government employees and pensioners currently receive compensation under the 7th Pay Commission framework:

At the current 58% DA rate, the total minimum salary reaches ₹28,440 for employees, while pensioners receive ₹14,220 as total minimum pension.

Projected Salary Increases Under 8th Pay Commission

Experts predict various fitment factor scenarios for the 8th Pay Commission, ranging from 1.8 to 2.86. The revised salary calculation follows the formula: Revised Salary = Basic Pay × Fitment Factor.

Salary Calculation Methodology

The Government may consider adopting the Aykroyd formula, developed by Dr. Wallace Aykroyd, to calculate wages. This formula estimates ideal salary based on minimum cost of living, focusing on nutritional requirements of an average worker and essential costs including food, clothing, and housing. Upon implementation of the 8th Pay Commission, DA/DR rates would reset to zero.

The 8th Pay Commission represents a crucial step in updating compensation structures for Central Government employees, with potential salary increases ranging from 80% to 186% depending on the final fitment factor adopted.

Source: https://www.etnownews.com/personal-finance/8th-pay-commission-explained-timeline-likely-salary-hike-and-what-it-means-for-central-government-employees-article-153432089

The Ministry of Labour and Employment has published the All India Consumer Price Index for Industrial Workers (AICPI-IW) for November 2025 at 148.2, setting the stage for a significant dearness allowance revision for central government employees. This inflation metric directly determines the six-monthly DA revision, with the next adjustment due from January 1, 2026 under the 8th Pay Commission framework.

November Inflation Data Crosses Critical Threshold

The November AICPI-IW reading has pushed the rolling 12-month average close to the next DA threshold, creating favorable conditions for central government employees and pensioners. Under standard calculations following the 7th Central Pay Commission guidelines, DA has already reached 59.93% by November 2025, positioning it just below the crucial 60.00% mark.

With only December 2025 inflation data pending, scenario-based calculations indicate the outcome is largely determined. Even accounting for reasonable fluctuations in the December index, computed DA remains above the 60% threshold, pointing to a minimum 2 percentage point increase from 58% to 60%.

Potential for Higher DA Increase

Employee associations have indicated the possibility of a more substantial hike depending on December's inflation trajectory. According to Manjeet Singh Patel, president of the All India NPS Employees Federation, the DA increase could range between 3% and 5% if December AICPI-IW remains elevated.

These projections remain indicative, with final calculations dependent on the Labour Ministry's December data release.

Implementation Timeline and Process

The government implemented the last DA revision in July 2025, raising it by 4 percentage points from 54% to 58%. The upcoming revision will be effective from January 1, 2026, though the formal announcement is expected in March or April 2026 following the December AICPI-IW release. Employees and pensioners will receive arrears retrospectively once the announcement is made.

8th Pay Commission Context

The 7th Central Pay Commission concluded on December 31, 2025, with no basic pay revision implemented from January 2026. The 8th Pay Commission, notified in November 2025, is expected to submit its recommendations after 18 months of deliberation. This commission's report will determine the fitment factor that shapes the next structural revision in salaries and pensions. Under existing regulations, dearness allowance merges into basic pay and resets to zero only upon implementation of the new fitment factor.