The 8th Pay Commission, which aims to update the pay of central government employees and pensioners, was approved by the Union Cabinet on Thursday. The decision was made public by Union Minister Ashwini Vaishnaw, who also stated that the commission would probably be formed shortly.
The news of the 8th Pay Commission, which comes soon before the Union Budget 2025, is a comfort to central government employees and pensioners whose monthly budgets are being eaten up by growing inflation.
The 8th Pay Commission, which aims to update the pay of central government employees and pensioners, was approved by the Union Cabinet on Thursday. The decision was made public by Union Minister Ashwini Vaishnaw, who also stated that the commission would probably be formed shortly.
However, the key question still stands: will pensions see a significant increase or a slight improvement?
Since January 1, 2016, central government employees and pensioners have been receiving their pay and benefits in accordance with the recommendations of the 7th Pay Commission.
PENSION INCREASE POSSIBLE
According to TeamLease Vice President Krishnendu Chatterjee, “the average pension increase should be in line with the increase in salaries.” A fitment rate of 2.5 to 2.8 is anticipated, raising the pension from the current Rs 9,000 to between Rs 22,500 and Rs 25,200.
Based on the average pension boost percentages from prior pay commissions, the 8th Pay Commission may offer an average pension hike of 20% to 30%, even though it is nearly impossible to estimate the hike. However, the commission’s consideration of a number of criteria, such as financial limits and economic conditions, will determine the exact percentage rise,” stated Ritika Nayyar, a partner at Singhania & Co.
The minimum wage and pension of government employees are anticipated to rise by 186% if the government approves the fitment factor of 2.86 in the 8th Pay Commission, Sumit Dhar, a partner at Fox Mandal & Associates LLP, said ET.
“Pensions under the 8th Pay Commission are likely to increase in line with the salary revisions, with an average hike of 25-30% expected,” stated Nihal Bhardwaj, Senior Associate at SKV Law Offices. Pension increases were matched by pay hikes under previous commissions, including the 6th and 7th. The latter implemented a fitment ratio of 2.57, increasing pensions by 23-25%.
“Retiree enhancements could include higher dearness relief (DR) to offset inflation and additional allowances for senior pensioners,” he added in an interview with ET. These steps are necessary to guarantee that pensions continue to be sufficient to cover growing expenses while satisfying employee demands for fair post-retirement payments. Only once the commission presents its findings and the government accepts its recommendations will the precise percentage rise for the 8th Pay Commission be known.
A major determinant of pension increases is the fitment factor, a multiplier used to compute the updated basic salary and pension. For instance, the new basic pension would rise to Rs 75,000 if the fitment rate was set at 2.5 and the current basic pension was Rs 30,000.
At the start of the new pension structure, the dearness relief (DR) is usually reset to zero. Over time, pensioners will receive periodic DR increases to account for inflation, resulting in regular pension hikes.
