7th Pay Commission Ends on December 31: Will Allowances Stop? Central Employees Now Look to the 8th Pay Commission

The tenure of the 7th Pay Commission is set to officially conclude on December 31, 2025, marking the end of a 10-year pay cycle for central government employees and pensioners. With this deadline approaching, attention has firmly shifted to the 8th Pay Commission, which is expected to redefine salaries, pensions, and benefits from January 1, 2026. However, while hopes are high for pay and pension revisions, there is growing clarity that arrears on allowances may not be paid, just as seen during the previous pay commission transition.

What Happens After the 7th Pay Commission Ends?

Traditionally, a new pay commission’s recommendations are linked retrospectively to the date immediately following the end of the previous commission. In line with this practice, if and when the 8th Pay Commission is implemented, revised pay and pension figures are likely to be calculated from January 1, 2026, even if the official approval comes later. This retrospective linkage typically results in arrears for basic pay and pension.

However, a crucial point for employees and pensioners is that allowances do not usually attract arrears. This distinction can significantly affect take-home benefits, especially for those who rely heavily on allowances such as HRA, transport allowance, or special duty allowances.

No Arrears on Allowances: A Familiar Pattern

A major takeaway from past pay commissions, particularly the 7th Pay Commission, is that arrears are generally limited to basic pay and pension. Allowances are often restructured, merged, or discontinued altogether, which eliminates the scope for arrears.

During the implementation of the 7th Pay Commission:

• 52 allowances were completely abolished

• 36 allowances were merged into existing or newly defined categories

• Risk and hardship allowances were standardized based on a 9-cell matrix

• House Rent Allowance (HRA) was revised based on city classification:

  • X category cities: 24%

  • Y category cities: 16%

  • Z category cities: 8%

• Most non-interest-bearing advances were scrapped, except:

  • Personal Computer Advance

  • House Building Advance (HBA), whose limit was raised from ₹7.5 lakh to ₹25 lakh

• Contributions and insurance cover under CGEGIS were enhanced

• Medical benefits were expanded with improved CGHS coverage and health insurance initiatives

• The gratuity ceiling was doubled from ₹10 lakh to ₹20 lakh

• Several reforms were introduced in disability pension, ex-gratia compensation, NPS, and consolidated pay packages for regulatory bodies

Because many allowances were either discontinued or absorbed into a new framework, arrears on allowances were not paid. Experts believe the same approach is likely under the 8th Pay Commission.

What Has the Government Said So Far?

On December 8, 2025, Union Minister of State for Finance Pankaj Chaudhary clarified in Parliament that no final decision has yet been taken on the implementation date of the 8th Pay Commission. Once constituted, the commission may take up to 18 months to submit its recommendations.

Until then, central government employees and pensioners will continue to receive salaries, pensions, Dearness Allowance (DA), and existing benefits strictly under the 7th Pay Commission structure.

What Can Employees Expect Going Forward?

• Basic Pay & Pension: Likely to be revised retrospectively from January 1, 2026, with arrears paid once the 8th Pay Commission is approved.

• Allowances: No clear provision for arrears; payments will likely begin only from the date of implementation.

• DA & Benefits: Will continue as per the 7th Pay Commission until new recommendations are enforced.

The Bottom Line

As the 7th Pay Commission officially ends on December 31, 2025, expectations from the 8th Pay Commission are rising among central government employees and pensioners. While revised pay and pensions may come with arrears, allowances are unlikely to offer the same benefit. Past trends strongly suggest that allowances will either be restructured or paid prospectively, without backdated compensation.

For now, employees will need to wait for formal announcements from the government, while continuing under the existing pay framework until the next commission’s recommendations are finalized and approved.