8th Pay Commission : Expectations, Fitment Factors, and Historical Context
The announcement of the 8th Pay Commission by the Modi government has sparked significant speculation and anticipation among the approximately 1.2 crore central government employees and pensioners regarding potential salary and pension increases. Central to this discussion is the fitment factor, a multiplier used to determine new basic pay.
Key Developments:
Terms of Reference (ToR): The government is expected to release the ToR for the 8th Pay Commission soon. This document will outline the commission’s objectives and guidelines, after which the chairman and members will be appointed.
Demand for High Fitment Factor: Various employee organizations are advocating for a high fitment factor, with some proposing a figure of 2.86 to ensure substantial salary and pension increments. However, former Finance Secretary Subhash Garg has indicated that such a significant increase may not be feasible.
Expected Fitment Factor: Many experts believe the fitment factor might settle around 1.92, which would still represent an increase over the previous 7th Pay Commission’s factor of 2.57.
Historical Context:
- 6th Pay Commission (2006): Had a fitment factor of 1.86, leading to an actual salary increase of approximately 54%.
- 7th Pay Commission (2016): The fitment factor rose to 2.57, but the actual salary increase was only about 14.2%. This discrepancy illustrates how inflation adjustments can consume a large portion of the proposed increases.
Calculation Insights:
- For the 7th Pay Commission, only 0.32% of the calculated increase was a real salary hike, with the majority aimed at adjusting for dearness allowance.
- If the 8th Pay Commission recommends a fitment factor of 1.92, the minimum basic pay could rise to Rs 34,560, which seems appealing in terms of salary jumps but may not reflect a substantial increase in take-home pay.
Current Situation:
Currently, there are about 47 lakh central government employees and 65 lakh pensioners awaiting finalization of the ToR and subsequent appointments to the pay commission. The new commission’s term is set to begin in January 2026, as the current 7th Pay Commission concludes its term on December 31, 2025.
Financial Implications:
The implementation of the previous commission in 2016 resulted in an additional financial burden of Rs 1.02 lakh crore on the government, highlighting the significant fiscal considerations involved in these pay increases.
In conclusion, while expectations for salary increases are high, historical trends suggest that much of the proposed fitment factor may be absorbed by inflation adjustments, leaving only a modest actual increase for employees and pensioners.
Source: https://www.financialexpress.com/money/8th-pay-commission-central-govt-employees-real-salary-hike-to-be-much-lower-despite-2-86-fitment-factor-heres-why-3843336/
