Will 8th Central Pay Commission make an impact on Union Budget 2026-27?

8th Central Pay Commission and its impact on Union Budget 2026-27, what are expectations?

The 8th Central Pay Commission (CPC) has moved into focus after the Centre notified its Terms of Reference (ToR) on November 3, 2025. With the Union Budget 2026-27 scheduled for February 1 next year, the approval of the ToR has prompted fresh questions from government employees and pensioners about what lies ahead for salaries, allowances and timelines.

“Speculation around the 8th Pay Commission’s appearance in the Union Budget 2026 has grown, but indications suggest the announcement may still be some distance away. With no financial provisioning made in the previous budget cycle and officials signalling that any fiscal impact of revised pay scales would materialise only from 2026-27 onwards, the government is expected to adopt a cautious approach,” said Athira TS, Associate Partner, King Stubb & Kasiva.

Notably, the 7th Central Pay Commission had two years to submit its report for its due implementation in 2016, in line with the 10-year revision cycle followed. The 7th CPC was announced during the interim budget 2014, and was subsequently approved by the Centre on June 29, 2016.

With 18 months remaining for the 8th CPC to come up with its recommendation, uncertainty prevails over the date of implementation of the commission, and with it the status of dearness allowance, or dearness relief for pensioners, when the 7th CPC ends on December 31, 2025. Usually, DA or DR resets to zero when the CPC is implemented.

“Given prevailing concerns around expenditure management and inflation, the Centre may prefer to delay formal implementation rather than commit to a sizable recurring outlay immediately. While the commission is expected to move forward in due course, a concrete budget-day declaration in 2026 appears uncertain, with a phased rollout or future-year provisioning remaining a more plausible scenario,” said Athira.

Furthermore, various central government employee bodies have put forth demands for revision of clauses related to employees and pensioners on ToR. The National Council (Staff Side) of Joint Consultative Machinery (NC JCM) for central government employees recently wrote a letter to Prime Minister Narendra Modi asking for restoration of the old pension scheme, among other demands, as follows:

- Fixation of minimum wage
- Fitment factor for existing employees
- Fixation of highest salary, pay on promotion, and MACP
- Date of effect of recommendation of the pay commission
- Revision of special pay granted to different categories
- Allowance, advances, and bonus
- Housing facilities including HRA
- All leave related issues, transfer policy
- Restoration of old pension scheme
- Revision of pension for pensioners, death cum retirement, and gratuity

Similarly, the Confederation of Central Govt Employees & Workers wrote a letter requesting the Finance Ministry to amend certain clauses related to revision of pension of central government employees in the ToR, among other demands.

- Merge 50 percent DA/DR with Basic Pay/Pension
- Grant 20 percent of pay/pension as an interim relief from January 1, 2026
- Scrap NPS/UPS; restore OPS for all Employees

Highlights of 7th Central Pay Commission 

The 7th Central Pay Commission increased the minimum pay of new employees at the lowest level to Rs 18,000 per month, while the salary of freshly recruited class I employees' was raised to Rs 56,100. Overall, the salary of employees, or pension for retirees, was raised by 14.29 percent with effect from January 1, 2016. Also, the gratuity ceiling for central government employees was enhanced to Rs 20 lakh, and the rate of increment was retained at 3 percent. As per recommendation, the commission abolished 51 allowances and subsumed 37 allowances. Overall, the financial impact after implementation of recommendation in 2016-17 was said to be Rs 1,02,100 crore, and additional outlay of Rs 12,133 crore for  payments of arrears of pay and pension.