8th Pay Commission: Will DA continue to rise without a reset?

8th pay commission

The Centre reviews pay scales, allowances, pensions and other service benefits for central government employees once every 10 years. The 8th Central Pay Commission (CPC) is due to be implemented from January 1, 2026, marking the formal end of the 7th CPC on December 31, 2025.

Although the government finalised the terms of reference (ToR) for the 8th CPC in November 2025, the panel is expected to take around 18 months to submit its recommendations. During this period and until the Cabinet approves the new pay structure, employees will continue to be paid under the existing 7th CPC framework.

What happens to salaries during the transition period?

Once the 8th CPC is officially implemented, the Centre will pay arrears for the entire intervening period. These arrears will include revised basic pay, allowances, retirement benefits and other components, calculated using the CPC-recommended fitment factor, a multiplier that converts the old basic salary into a new one.

This has been the standard practice across previous pay commissions.

The DA question troubling employees

After a new Pay Commission is implemented, the accumulated dearness allowance (DA) is effectively merged into the basic pay and DA is reset to zero. The revised salary is then calculated by applying the fitment factor to the old basic pay, with the factor already factoring in the DA merger.

For example, if an employee’s basic pay is Rs 10,000, DA is Rs 5,000 and the fitment factor is 3, the new basic pay becomes Rs 30,000 (Rs 10,000 × 3). DA starts afresh on this higher basic pay and is revised every six months, ensuring future increases are calculated on a permanently higher salary base.

The immediate concern, therefore, is the treatment of dearness allowance. DA was last revised from 55 percent to 58 percent with effect from July 1, 2025, and is scheduled for its next revision on January 1, 2026.

Under existing practice, DA continues to be revised every six months until the new pay commission’s fitment factor is implemented. At that point, the accumulated DA is merged with the basic pay and reset to zero, after which DA again starts rising afresh.

With the 8th CPC recommendations likely to be implemented only around 2027–28, employees await clarity on whether DA hikes will continue seamlessly or whether an alternative approach would be considered.

An alternative proposal from employee unions

Manjeet Singh Patel, president of the All India NPS Employees Federation, has suggested a different approach, one that avoids a complete DA reset.

According to Patel, if DA reaches around 74 percent by January 1, 2028, the government could merge 50 percent of DA into the basic pay while allowing the remaining 24 percent to continue without being reset to zero. This merged figure would then form the new basic salary.

He argues that this approach would better protect employees’ purchasing power during a period of high inflation.

What about the fitment factor?

Patel also flagged the widening pay gap between employees at different levels. Currently, Level 1 employees earn a basic pay of Rs 18,000 per month, while Level 18 employees earn up to Rs 2.5 lakh.

He believes the 8th CPC should consider a fitment factor of 2.64 and revise the calculation of minimum wages by increasing the number of family consumption units from three to five.

Currently, the government considers up to three units of an employee’s family for the purpose of calculating need-based minimum wages, comprising a government employee (1 unit), spouse (0.8 unit), and two children (0.6 units).

What lies ahead

As the 7th CPC nears its end, central government employees are awaiting a clear signal from the government on whether it will stick to the traditional DA reset after fitment or explore a middle path that allows DA to continue without falling back to zero. The decision will have a significant impact on take-home pay and arrears in the early years of the 8th Pay Commission.