Government employees and pensioners are eagerly waiting for the 8th Pay Commission. It is expected that there will be an increase in salary and pension in line with inflation. Government employees are waiting for a good increase. However, a recent report on the 8th Pay Commission by Kotak Institutional Equities may disappoint government employees.
What does Kotak’s latest report say?
According to a report by Kotak Institutional Equities, central government employees may get an effective salary hike of only 13% under the 8th Pay Commission. This will be less than the 14.3% hike received in the 7th Pay Commission.
According to the report, this time the fitment factor is likely to be 1.8. In the 7th Pay Commission, it was 2.57. This means that the new basic pay will be determined by multiplying the existing basic pay by 1.8. However, DA (Dearness Allowance) will be started from zero. This will result in a relatively low increase in the total pay.
Basic pay will increase, but here’s the catch…
The basic pay will increase with the implementation of the 8th Pay Commission. For example, if an employee’s current basic pay is ₹18,000, it can go up to ₹32,000 as per the factor of 1.8. However, currently ₹9,900 (55% of DA) is added to it. This takes the total pay to ₹27,900. This benefit will be limited as DA is reset in the new pay structure.
Similarly, those whose basic salary is ₹50,000 can have their new basic salary go up to ₹90,000. However, after the removal of the existing DA of ₹27,500, the effective increase will be only from ₹77,500 to ₹90,000.
Demand for equality like the 7th Pay Commission…
The employees’ side members in the National Council of Employees’ Unions-Joint Consultative Machinery (JCM) have talked about demanding a fitment factor of 2.57 like the 7th Pay Commission. However, according to initial indications, the government is in the mood to keep it lower.
Experts believe that the increase in basic pay will appear large, but the actual benefit will depend on how DA is incorporated into the new structure.
When will the 8th Pay Commission be implemented?
The formal process of forming the 8th Pay Commission is expected to begin in the next few months. Its recommendations are likely to be implemented around 2026. The 8th Pay Commission is ideally to be implemented by January 1, 2026. If there is a longer delay, the government may give arrears to government employees and pensioners.
