The Union Cabinet has approved the Terms of Reference (ToR) for the 8th Central Pay Commission, chaired by Justice Ranjana Prakash Desai, to revise pay, allowances, and pensions of Central Government employees. The Commission will submit its report within 18 months.
Description:
About Pay Commission:
- Constitution: Set up periodically by the Government of India to review the salary, allowances, and pensions of Central Government employees.
- Legal Status: Advisory body — its recommendations are not binding on the government.
- Frequency: Constituted roughly every 10 years.
- First Pay Commission: 1946.
Comparison: 7th CPC vs 8th CPC:
| Feature | 7th Central Pay Commission (CPC) | 8th Central Pay Commission (CPC) |
| Constituted by | Union Government (2014) | Union Government (Approved in 2025) |
| Chairperson | Justice A.K. Mathur | Justice Ranjana Prakash Desai (Retd.) |
| Under | Department of Expenditure, Ministry of Finance | Department of Expenditure, Ministry of Finance |
| Effective Date | 1 January 2016 | 1 January 2026 (expected) |
| Coverage | ~47 lakh employees & 52 lakh pensioners | ~50 lakh employees & 65 lakh pensioners (including Defence personnel) |
| Fitment Factor | 2.57 | 2.28 – 2.86 (expected) |
| Minimum Basic Pay | ₹7,000 → ₹18,000 | ₹18,000 → ₹26,000–₹41,000 (expected) |
| Structure | Introduced Pay Matrix (19 levels) replacing Pay Bands & Grade Pay | Likely continuation with possible revision and simplification |
| Minimum Pension | ₹9,000 | Expected upward revision (linked with inflation indexation) |
| Dearness Allowance (DA) | Revised periodically (merged every 10 years) | To be merged with basic pay during implementation |
| Focus Areas | Simplified structure, parity across services, rationalization of allowances | Pay parity, market alignment, pension reforms, fiscal impact assessment |
| Implementation Burden | ₹1.02 lakh crore (~0.7% of GDP) | May exceed ₹1 lakh crore fiscal impact |
| Expected Pay Hike | 23.5% overall | 40–50% overall (projected) |
| Impact on Economy | Boosted consumption but increased fiscal burden | Expected to raise demand and inflation slightly |
| Timeline for Report | Around 21 months | Within 18 months of constitution |
| Major Innovation | Pay Matrix System | Expected introduction of performance-linked pay |
| Pension Reforms | Strengthened OROP (Defence) | Likely to enhance pension indexation and sustainability measures |
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