Dearness allowance growth under the 7th Central Pay Commission (CPC) has recorded its slowest pace since the 5th Pay Commission, a development that could significantly impact salary calculations under the upcoming 8th Pay Commission. The allowance, designed to offset inflation's impact on government employees, currently stands at 58.00% of basic pay and is expected to influence future wage revisions.

Historical DA Growth Comparison

A comparison of DA growth across different pay commissions reveals significant variations in allowance increases over the decades.

The 6th CPC recorded the highest DA growth at 125.00% of basic pay during its ten-year tenure, significantly outpacing both the 5th CPC's 74.00% increase and the current 7th CPC's 58.00% growth. With the upcoming March revision, the 7th CPC's DA is expected to rise to approximately 60.00%.

DA Revision Timeline and Projections

Dearness allowance undergoes bi-annual revisions in March and October, with changes taking effect retrospectively from January and July respectively. The 8th Pay Commission, established in November 2025, has been allocated 18 months to submit its recommendations, with the report not expected before mid-2027.

Before the 8th Pay Commission implementation, DA will undergo at least three more revisions:

• March 2025
• October 2025
• March 2027

Considering average increases of 2.00% to 4.00% per revision, cumulative DA is projected to reach approximately 70.00% before the 8th Pay Commission rollout.

Impact of COVID-19 on DA Growth

The slower DA growth under the 7th CPC can be attributed primarily to the 18-month revision freeze during the COVID-19 pandemic. The government suspended periodic DA and dearness relief increases during the health crisis to reduce fiscal burden on the exchequer.

Implications for 8th Pay Commission Salary Calculations

The relatively lower DA growth carries significant implications for salary increases under the 8th Pay Commission, as DA resets to zero whenever a new pay commission is implemented. This reset mechanism means lower current DA levels could result in higher effective wage increases.

7th Pay Commission Implementation Example

The 7th Pay Commission's implementation in 2016 demonstrates this calculation methodology:

End of 6th Pay Commission (2016):

7th Pay Commission Implementation (2016):

The transition from ₹19,200.00 to ₹23,670.00 represented an effective salary growth of 14.30% for central government employees. The 7th Pay Commission had recommended a fitment factor of 2.57, raising the basic minimum salary from ₹7,000.00 to ₹18,000.00, representing a 157.00% increase in basic pay.

Expected Impact on 8th Pay Commission

With DA currently at less than half the level reached under the 6th Pay Commission, the effective wage increase under the 8th Pay Commission is anticipated to be relatively higher, even with a modest fitment factor recommendation. This lower starting point for DA provides greater scope for meaningful salary increases when the new commission's recommendations are implemented.

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