8th Pay Commission: Here's how the salary structure, pay hike, DA, arrears, fitment factor and other elements are set

Constituted by Prime Minister Narendra Modi last year, the 8th Pay Commission is set to make big decisions on salary hikes and fitment factor, based on which updated compensation for central government employees and pensioners will be finalised.

The commission was announced in January last year, and its Terms of Reference (ToR) were issued in November. Since then, there has been much speculation over implementation of the salary hikes, arrears, amendments and proposed changes to pension structures.

What is the 8th Pay Commission?

The Pay Commission is a government panel established every 10 years to revise pay, allowances and pensions of central government employees and retired former servicemen. It is also responsible for wider implications of these revisions on contributions, retirement benefits and government spending. The current panel is the eight such constituted by the central government since Independence.

How will the 8th Pay Commission make its decisions?

The 8th Pay Commission is chaired by Former Supreme Court Justice Ranjana Prakash
Desai. Other members on the panel are Professor Pulak Ghosh, tenured Professor of Finance, Member of the Economic Advisory Council to the Prime Minister, as a Member of the Commission and Pankaj Jain, former IAS, as Member-Secretary.

The panel will gather views and inputs from employee unions, labour groups, ministries, pension bodies and other similar stakeholders; which will then be analysed to decide allowances, pension formula and salary structures for the relevant employee and retiree groups.

Discussions and feedback from stakeholders are also solicited before the Commission provides its final recommendations. Notably, it opened formal memorandum submissions and scheduled stakeholder consultations in March and April 2026, including a Dehradun meeting set for 24 April 2026.

How long does it take from recommendations to be implemented?

The 8th Pay Commission was notified on 17 January 2025 and scheduled to come into force by 1 January 2026. However, final recommendations are still pending.

Notably, when we use the previous pay commission timelines as reference, the process is a lengthy one. The 7th Pay Commission took two and a half years from formation to rollout, and the 6th Pay Commission took two years; while the 5th Pay Commission took three and a half years to be implemented.

How will the fitment factor be decided?

Fitment factor is the multiplier that converts old basic pay into revised basic pay. A higher factor in this case means a sharper jump in salaries and pensions. It also influences gratuity-linked calculations, provident fund contributions and other inputs linked to basic pay.

For example, for fitment factor between 2.60 to 2.85, salaries might jump by 24-30%. This further means that a current basic pay in the range of ₹20,000-22,000 may rise to approximately ₹46,600-57,000.

For the 8th Pay Commission, employee bodies have recommended a fitment factor of 3.0 to 3.25, in line with the rising inflation and recent economic developments, which could significantly influence the revised pay structure.

How have arrears historically been allocated?

Historically, arrears are backdated to the end of the previous commission and have varied significantly depending on timeline and implementations.

• As per reports, in the 5th Pay Commission, minimum basic pay holders received around ₹11,200 as arrears for 21 months.
• In the 6th Pay Commission, minimum basic pay holders received around ₹71,000 as arrears for 32 months — among the largest such payouts.
• Further, the latest 7th Pay Commission, minimum basic pay holders received around ₹13,500 as arrears for six months.

How is Dearness Allowance calculated?

Dearness allowance is a cost-of-living adjustment included in a government employee's salary. It aims to offset inflation and maintain purchasing power. The rates are usually reviewed and updated twice a year. Over time, the proportion of basic pay in total salaries has decreased from 65% to about 50%, while allowances have increased.

Notably, there is speculation that the 8th Pay Commission will merge DA into the basic pay, creating a new pay structure. “This means that the DA, which currently exists as a separate allowance, will become part of the employee’s base salary, leading to a recalibration of salary components, allowances, and retirement benefits,” CA Chandni Anandan, Tax Expert at Clear Tax told Mint. However, this development has not been confirmed officially.

DA was last hiked in October 2025 by 3% based on the recommendations of the 7th Central Pay Commission.

Can central govt employees expect salary hikes?

With the fitment factor reportedly under revision and likely to rise, salaries are also set to rise. The 8th Pay Commission salary hike will be decided on the basis of the fitment factor that will be suggested by the members of the CPC.

As many as 50 lakh central government employees, including defence personnel, and around 65 lakh retired central government pensioners, including defence retirees, could see basic salary rise to ₹51,480 from ₹18,000.

Notably, there are 18 levels of employees and the individual hikes will depend on the level of the employee or pensioner as basic pay of these employees differs from level to level. These are:

• Level 1: Entry-level / Group D employees;
• Levels 2–9: Group C employees;
• Levels 10–12: Group B employees; and
• Levels 13–18: Group A employees.

The hikes, based on conservative fitment factor of 2.15 ranges from over ₹38,500 to more than ₹2 lakh across employee levels.

What is the likely revision to pension payouts?

Besides salary hikes for employees, pension payouts for retired central government employees are also likely to increase proportional to the new basic pay structure.

While the minimum pension that currently stands at around ₹9,000, this could jump to between ₹22,500-25,200 depending on the final fitment factor and changes incorporated by the Commission.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.