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.

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.

Source: https://www.etnownews.com/personal-finance/8th-pay-commission-on-cards-from-first-to-7th-cpc-how-central-government-employees-got-salary-hikes-explained-article-153423802