8th Pay Commission Explained: Impact on Salary, Pension, DA and Arrears—Here’s the Complete Breakdown
The 8th Central Pay Commission is expected to bring significant changes to the salaries, pensions, and allowances of central government employees and pensioners. More than 50 million serving employees and around 69 million pensioners are likely to be impacted once the recommendations are implemented. While the final implementation date is yet to be confirmed, the government has clarified its position on key issues such as the fitment factor, dearness allowance (DA), dearness relief (DR), and arrears.
Here is a detailed and easy-to-understand explanation of what may change under the 8th Pay Commission and how much financial benefit employees and pensioners could receive.
Formation of the 8th Pay Commission
The government has officially constituted the 8th Pay Commission on 3 November 2025. Former Supreme Court judge Justice Ranjan Prabha Desai has been appointed as the Chairperson. Economist Professor Pulak Ghosh is serving as a part-time member, while Pankaj Jain has been named Member-Secretary.
The government expects the commission to submit its recommendations within 18 months. Since the tenure of the 7th Pay Commission ends on 31 December 2025, it is widely believed that the revised pay structure may be considered effective from 1 January 2026, even if implementation happens later.
Fitment Factor: The Key to Salary and Pension Hike
As with previous pay commissions, the fitment factor will play a central role in deciding the increase in basic salary and pension. The fitment factor is a multiplier applied to the existing basic pay or basic pension.
If the fitment factor is finalized at around 2.15, the basic salary of employees could increase to more than double their current basic pay. Since allowances such as HRA, TA, and pension benefits are linked to basic pay, a higher fitment factor would lead to a cascading increase in overall earnings and retirement benefits.
When Will the Recommendations Be Implemented?
Although the commission may submit its report within 18 months, actual implementation could take additional time due to budgetary approvals and administrative processes. Experts believe that the revised pay and pension structure could be implemented by financial year 2028.
However, if the government decides to make the recommendations retrospectively effective from 1 January 2026, employees and pensioners will become eligible for arrears covering the delayed period.
How Much Arrears Can Employees Expect?
Arrears will be paid once the recommendations are approved and implemented. Based on government procedures, this could take one to two years after submission of the report.
For example, if the new pay structure is implemented in January 2028 but is considered effective from January 2026, employees would receive arrears for 24 months.
Assuming an entry-level employee receives an average monthly increase of ₹11,900, the total arrears for two years would amount to approximately ₹2.85 lakh. This means even lower pay-level employees could receive ₹2.8–3 lakh as arrears, while those at higher pay levels may receive significantly larger amounts.
Government’s Stand on DA and DR
The Finance Ministry has clearly stated that there is no proposal to merge Dearness Allowance (DA) or Dearness Relief (DR) with basic pay at present. This clarification puts an end to speculation circulating on social media and among employee unions.
DA and DR will continue to be revised every six months, as per the existing system. These revisions will remain linked to the All India Consumer Price Index for Industrial Workers (AICPI-IW), ensuring protection against inflation.
What Happens if Fitment Factor Is 2.15?
If the fitment factor is fixed near 2.15, the impact will extend beyond basic salary. Pension amounts, HRA, and other allowances will rise proportionately, offering long-term financial relief to both employees and retirees.
Policy-level discussions suggest that arrears could cover nearly five quarters if implementation is delayed, making the eventual payout substantial.
Financial Impact on the Government
Experts estimate that the combined financial burden on the central and state governments could exceed ₹4 lakh crore. If arrears are included, the total cost may rise to nearly ₹9 lakh crore.
The government has assured that necessary budgetary arrangements will be made to implement the recommendations while maintaining fiscal balance. Authorities have emphasized that employee welfare and economic stability will be given equal priority.
What Employees and Pensioners Should Expect
The 8th Pay Commission is poised to deliver a major financial reset for government employees and pensioners. While timelines may vary, clarity on DA policy, fitment factor expectations, and arrears calculations has already provided some reassurance.
As the commission progresses with its work, employees and pensioners can expect more concrete announcements regarding implementation dates and revised pay structures in the coming months.
