There's great news for central government employees. The government has announced the formation of the 8th Pay Commission and its Terms of Reference (ToR), meaning guidelines. This means the path is now clear for increases in salaries, allowances, and pensions for government employees. According to reports, the commission will submit its recommendations to the government by April 2027, and they are expected to be implemented by Diwali 2027.

The government has appointed three members to the commission. Former Supreme Court Justice Ranjana Prakash Desai will be its chairperson. Professor Pulak Ghosh will serve as a part-time member, and Pankaj Jain will serve as member-secretary. The commission may also submit interim reports periodically, providing quick relief to employees.

What will the 8th Pay Commission do?
According to the government, the commission's objective is to review the salaries, allowances, bonuses, gratuities, and performance-linked incentives (PLI) of employees and pensioners. This will ensure that the government is not burdened with additional financial burdens and maintains financial balance. The commission will also compare the impact on state governments and the salary structures of PSUs and the private sector to ensure parity.

How much could salaries increase?
According to estimates from financial institutions such as Kotak Institutional Equities and Ambit Capital, the fitment factor this time could be between 1.8 and 2.46. If the basic salary is ₹18,000...

At a 1.82x factor, the new salary will be ₹32,760, a 14% increase.
At a 2.15x factor, the new salary will be ₹38,700, a 34% increase.
At a 2.46x factor, the new salary will be ₹44,280, a 54% increase.
However, the dearness allowance (DA) will be reset to zero, so the actual increase is expected to be around 13-15%.

Changes in bonuses, gratuity, and PLI
The 8th Pay Commission will not be limited to salaries alone; it will also reconsider bonuses, retirement benefits, gratuity, and the PLI system. The last 7th Pay Commission, implemented in 2016, resulted in an average salary increase of 14-16%. Now, employees are hopeful that the 8th Pay Commission may provide even greater relief.

The government aims to ensure that the new pay structure not only increases employees' purchasing power but also improves the country's economic stability and productivity. If everything goes as planned, Diwali 2027 could truly be the icing on the cake for government employees.

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