8th Pay Commission: The Union Cabinet, led by Prime Minister Narendra Modi, approved the Terms of Reference (ToR) for the 8th Pay Commission in October, raising hopes of salary revisions for government employees.
The pay commission is expected to revise salaries, pensions, and allowances based on a key multiplier, known as the fitment factor, which is typically determined in relation to inflation.
As government employees await the implementation of the 8th Pay Commission, here's a detailed look at how the fitment factor will be determined and its expected number under the proposed commission.
How will fitment factor be determined?
To address rising living costs and retain talent, the 8th Pay Commission will focus on several factors, including inflation, aiming for sustainable public finances with adjustments after a decade since the last revision.
“The fitment factor for the 8th Pay Commission will be shaped by the same fundamentals that have influenced past revisions: inflation trends, real wage erosion, fiscal capacity, and the government’s broader compensation philosophy,” according to CA Chandni Anandan, Tax Expert at Clear Tax.
“Its purpose is to reset salaries to reflect the rising cost of living while keeping long-term public finances sustainable. With the last major revision happening nearly a decade ago and household expenditure rising sharply since, the 8th Pay Commission must balance economic reality with the need to attract and retain talent across essential government roles,” Anandan said.
What will likely be fitment factor in the 8th Pay Commission?
Early projections for the 8th Pay Commission suggest a fitment factor as high as 2.57, which could raise salaries and pensions for approximately one crore central government employees and retirees.
“While the government has not declared an official number yet, early expectations place the 8th Pay Commission fitment factor in the range of 1.83 to 2.57. This band reflects inflation-adjusted projections and historical movement between commissions,” the expert noted.
“If implemented, it would lead to a meaningful upward revision in salaries and pensions, directly benefiting about one crore central government employees and retirees,” Anandan added.
How much was the fitment factor in the 7th Pay Commission?
The current Pay Commission used a fitment factor of 2.57. However, this does not imply that salaries increased by 2.57 times, since it was only added to the basic pay, Mint previously reported.
It must be noted that dearness allowance is reset to zero at the beginning of the new Commission, as the index is re-based. This is expected to happen under the 8th Pay Commission as well.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or experts, and not of Mint.
