Hopes for a substantial salary increase under the much-anticipated 8th Pay Commission may take a hit, according to a recent report from Kotak Institutional Equities. While central government employees and pensioners were expecting a significant hike in pay and pension amid rising inflation, the latest projections suggest that the actual increase could be more modest than expected—just 13%.
The Kotak Institutional Equities report outlines that the upcoming 8th Pay Commission may offer only a 13% effective hike in salaries for central government employees. This increase would be less than the 14.3% hike implemented under the 7th Pay Commission.
The report points to a crucial factor behind this lower hike—a reduced fitment factor. While the 7th Pay Commission had a fitment factor of 2.57, the 8th Pay Commission is expected to bring it down to 1.8. This means that the new basic salary will be calculated by multiplying the current basic pay by 1.8.
At first glance, this may look like a substantial jump in basic salary. For example:
A government employee currently earning a basic salary of ₹18,000 could see it rise to ₹32,400 post revision.
Someone drawing a basic of ₹50,000 may see it climb to ₹90,000.
However, the dearness allowance (DA) will be reset to zero, which could dampen the overall effect. Currently, many employees are receiving DA at 55% of their basic pay. So, the actual take-home salary may not increase significantly, even if the basic pay does.
Employee associations, particularly the National Council of the Joint Consultative Machinery (JCM), have already voiced their demands. They are urging the government to maintain the 2.57 fitment factor used in the 7th Pay Commission to ensure fair benefits.
But early indicators from policy discussions suggest that the government may not agree to this demand, opting instead for a more conservative pay structure.
Experts warn that while the increase in basic pay might appear attractive, the real benefit depends on how DA is reintegrated into the salary system after the reset. In simple terms, without significant DA adjustments, the net gain in salary will be minimal for most employees.
They also highlight that the timing of implementation will play a critical role in determining the overall financial impact. Any delays could mean employees receive arrears, but it would also push back the date of benefit realization.
The formal formation of the 8th Pay Commission is expected to begin in the coming months. Its recommendations are likely to be submitted and enforced by January 1, 2026, which aligns with the typical 10-year revision cycle followed by previous pay commissions.
If the implementation is delayed beyond the target date, the government is likely to compensate employees with arrears, ensuring they do not lose out due to administrative lags.
The recent report has somewhat tempered expectations among the nearly one crore central government employees and pensioners across India. While a salary revision is on the horizon, the numbers indicate that the increase might not be as generous as many were hoping.
Still, much depends on how the government structures the DA component and whether employee unions succeed in negotiating a better fitment factor. Until then, government staff may need to brace for a modest rather than massive pay bump in 2026.
