Cabinet Approves 8th Pay Commission Terms of Reference: Here’s How Salaries Will Be Decided
The Central Government has brought good news for millions of employees and pensioners by approving the Terms of Reference (ToR) for the 8th Central Pay Commission. The decision, taken in a Cabinet meeting chaired by Prime Minister Narendra Modi on Tuesday, sets the stage for the next major pay and pension revision that could impact more than 1.18 crore central government beneficiaries across India.
With this approval, the commission will now begin formal work on drafting its recommendations, which must be submitted to the government within 18 months of its formation. These recommendations will form the foundation for determining new salary structures, allowances, and pensions for central government employees and retirees.
The government has outlined clear directions for the commission to ensure that the recommendations align with India’s broader economic and fiscal priorities. According to the official brief, the commission must consider the following key aspects while framing its proposals:
The current economic condition of the country and the need to maintain fiscal discipline.
The availability of resources for developmental projects and welfare schemes.
The financial burden of non-contributory pension schemes, which are fully funded by the government.
The impact of salary revisions on state finances, since most states implement central recommendations with minor modifications.
A comparative study of salary structures, perks, and working conditions between central public sector undertakings (CPSUs) and the private sector, to ensure balanced and realistic recommendations.
By taking these factors into account, the 8th Pay Commission aims to design a sustainable and equitable salary model that rewards government employees while keeping fiscal stability intact.
The government has confirmed that the 8th Pay Commission will be a temporary body, consisting of:
One Chairperson,
One Part-Time Member, and
One Member-Secretary.
The commission will also have the authority to submit interim reports, allowing the government to implement certain recommendations ahead of the final report if necessary.
This flexibility ensures that employees could begin to see benefits even before the commission’s complete findings are finalized.
The Ministry of Finance has issued five key Terms of Reference that will guide the 8th Pay Commission’s functioning:
The commission will base its recommendations on the nation’s economic conditions and principles of fiscal prudence.
It will ensure adequate financial provision for developmental and welfare-oriented expenditures.
It will assess the unfunded liabilities of existing non-contributory pension schemes.
The commission will evaluate the impact of its proposals on state governments’ finances, given their tendency to mirror central pay structures.
It will analyze salary, benefits, and employment conditions in both the public and private sectors to maintain competitiveness and fairness.
These guidelines are designed to create a data-driven, transparent, and balanced pay revision framework that reflects both employee welfare and fiscal responsibility.
Traditionally, a new Pay Commission is established every 10 years to review and revise the pay and pension structure for central government employees. The 7th Pay Commission, implemented in 2016, was the last major overhaul.
Due to delays in constituting the 8th Commission, experts believe that the new recommendations might take effect from 2026. The government has set an 18-month deadline for the commission to submit its final report, meaning the impact could be felt closer to mid or late 2026.
The announcement to form the 8th Pay Commission was first made in January 2025. The primary goal was to modernize the compensation structure for central government employees and make necessary adjustments in pay, allowances, and service conditions in line with the current economic realities.
With the Cabinet’s approval of the ToR, the process has now officially begun — a move that is expected to set in motion one of the most anticipated pay revisions in recent years.
Following the Cabinet’s decision, enthusiasm is running high among central employees and pensioners. Many are hopeful that the 8th Pay Commission’s recommendations will lead to a significant hike in salaries, allowances, and pensions.
Experts believe that while the commission’s report will directly influence the income levels of government employees, it will also have a ripple effect on the fiscal health of state governments, since they often adopt similar pay structures.
With millions of employees and pensioners awaiting the outcome, the 8th Pay Commission’s work will be crucial in shaping not just individual incomes but also India’s broader economic and fiscal trajectory.
