Centre to finalise 8th Pay Commission terms; cabinet approval likely soon

Each commission has played a crucial role in determining salary structures, allowances, and pension benefits for government employees

The government is moving closer to setting up the Eighth Pay Commission, with its terms of reference likely to be sent to the cabinet for approval by early next month. A formal notification will follow the cabinet clearance, allowing the commission to begin functioning from April, a top government official said.

The ministry had written to the ministries of defence and home affairs, and the Department of Personnel and Training (DoPT), seeking their recommendations on the commission’s mandate. Once formally set up, the commission will be responsible for reviewing and recommending salary structure revisions for central government employees.

The finance ministry has already received some feedback on the terms of reference and is awaiting final suggestions. “We have got some inputs. Some are still pending. It will be sent to the cabinet this month or early next month for approval. As soon as the approval comes, a notification will be issued,” the official told Moneycontrol.

Expected timeline

The Eighth Pay Commission is expected to begin functioning once the terms of reference are finalised, the official said. If constituted by the end of the month, it is likely to submit its report by March 2026, though the process may take less than a year. Previous pay commissions have typically taken over a year to present their reports.

Impact

The pay revisions recommended by the Eighth Pay Commission will have a bearing on more than 50 lakh central government employees and pensioners, including defence personnel. This will mean a significant impact on government finances, as the implementation of the Seventh Pay Commission in 2016 resulted in an estimated expenditure increase of Rs 1 lakh crore for FY17.

The financial impact of the Eighth Pay Commission will be felt only from FY27 onwards.

The latest pay revisions are also expected to boost consumption and economic growth, enhancing the quality of life for government employees.

Since 1947, seven pay commissions have been constituted, with the last one implemented in 2016. Each commission has played a crucial role in determining salary structures, allowances and pension benefits for government employees, significantly influencing public expenditure.

Meanwhile, the government has for now ruled out merging 50 percent dearness allowance (DA) and dearness relief (DR) with basic pay and pensions. This was clarified by Minister of State for Finance Pankaj Chaudhary in response to a query in the Rajya Sabha on March 20.