What To Expect From The 8th Pay Commission: Higher Salaries, But Performance-Linked

As per the schedule announced by the government, the implementation of recommendations is expected from January 1, 2026, which is the usual gap of 10 years between two pay commissions. Its suggestions could cover several issues, such as salary and pension hikes, as well as new allowances. 

According to officials, a key focus is the “fitment factor”, the multiplier used to adjust pay scales. While the 7th Pay Commission used a factor of 2.57, the 8th is expected to propose a factor of 2.28, potentially raising the minimum basic salary from Rs 18,000 to Rs 21,600 and pensions from Rs 9,000 to Rs 10,800, they said, adding that the final recommendations would be made by the Commission, as and when it is constituted. 

It is challenging to predict the exact increase in income following the 8th Pay Commission. But experts believe that basic salaries could eventually rise between 20-35 per cent. 

How Hikes Will Pan Out

The 8th Pay Commission is set to bring about significant changes in the salary structure of central government employees. See box (below) for the projected salaries for various grades, if the fitment factor of 2.28 that experts are hinting at is indeed adopted. 

Along with basic salary adjustments, other allowances like house rent allowance (HRA) and travel allowance (TA) will also be revised, based on location and job-related travel. This would mean two employees on the same pay level may receive different gross earnings due to varying allowances.

The hike in pay will also have an impact on the National Pension System (NPS) contributions, as central government employees contribute 10 per cent of their basic pay and dearness allowance (DA) to the NPS, while the government contributes 14 per cent. Both contributions will increase following salary revisions. The charges under CGHS will also be updated, based on the revised salary levels.

Since India’s independence, the government has constituted seven Pay Commissions to date, with the last one established in 2014. The 7th Pay Commission’s recommendations covered the period from January 1, 2016, to December 31, 2025. The implementation of these recommendations led to an additional expenditure of Rs 1 lakh crore for the fiscal year 2016-17.

Experts believe that the 8th Pay Commission will follow a similar trend, taking into account the movement of the Consumer Price Index (CPI) during the intervening period, to determine an appropriate fitment factor.

Financial Implications & Performance-Based Incentives

Its financial implications are expected to be reflected in the Union Budget for 2026-27 and beyond, giving the government sufficient time to plan for the higher expenditure.

The formation of the 8th Pay Commission is also expected to boost consumption and economic growth, while improving the quality of life for government employees. Historically, such revisions have led to steep increases in revenue expenditures. 

While the increase in revenue expenditure is beneficial for employee morale and economic activities, it places a huge burden on the government's finances. The rise in salary and pension expenditures would affect the fiscal space available for the growth of capital expenditure.

These changes will have cascading effects on the recommendations of the Sixteenth Finance Commission, which will cover the period from 2026-27 to 2030-31, experts feel.

However, the 8th Pay Commission presents an opportunity to the government to introduce long-standing reforms within the Indian bureaucracy. It is being suggested that to drive productivity and efficiency, salaries should be linked to performance through the introduction of performance-based incentives.