8th pay commission update: Cabinet approves terms of reference, panel to make recommendations within 18 months

8th Pay Commission update: The Union Cabinet, chaired by Prime Minister Narendra Modi, on 28 October, has approved the Terms of Reference (ToR) of the 8th Central Pay Commission, an official release said.

In January 2025, Union Minister Ashwini Vaishnaw announced that the Centre had approved the implementation of the 8th Pay Commission. This panel is set to revise the allowances, pensions and salaries of present and retired central government employees in line with inflation.

But since any future development was dependent on the ToR, which is a framework that defines the scope of a pay commission and specifies the areas in which it must offer recommendations, the commission lacks official recognition and is unable to initiate its functions.

8th Pay Commission: What are the Terms of Service?

• The 8th Pay Commission will be a temporary body.
• The Commission will comprise one Chairperson, one Member (Part Time), and one Member-Secretary.
• It will make its recommendations within 18 months of the date of its constitution.
• It may consider, if necessary, sending interim reports on any of the matters as and when the recommendations are finalised.

Commission to consider these aspects:

While making the recommendations the Commission will keep in view the followings:

• The economic conditions in the country and the need for fiscal prudence;
• The need to ensure that adequate resources are available for developmental expenditure and welfare measures;
• The unfunded cost of non-contributory pension schemes;
• The likely impact of the recommendations on the finances of the State Governments which usually adopt the recommendations with some modifications; and
• The prevailing emolument structure, benefits and working conditions available to employees of Central Public Sector Undertakings and private sector.

What is the 8th Pay Commission?

The Government announced the formation of the 8th Pay Commission in January 2025 to examine and recommend changes in the Salaries and other benefits of central government employees. Its recommendations are expected from 1 January 2026.

The Central Pay Commissions are constituted every 10 years to examine various issues of emoluments structure, retirement benefits, and other service conditions of Central Government employees and make recommendations on the changes required thereon.

Salary structure of central government employees

The salary of a government employee consists of basic pay, dearness allowance (DA), house rent allowance (HRA) and transport allowance.

• The basic salary of employees constitutes 51.5% of their total income,
• DA accounts for approximately 30.9%,
• HRA accounts for about 15.4%, and
• Travel allowance accounts for around 2.2%, according to a report by Ambit Institutional Equities.

The 8th Pay Commission is expected to benefit over a crore of central government employees and retirees — nearly 50 lakh central government employees, including defence personnel; and close to 65 lakh central government pensioners, including defence retirees.