8th Pay Commission Update: When Will It Be Implemented? Government Clarifies on Terms of Reference

By Siddhi Jain | Updated: Sep 12, 2025, 10:53 IST

The long-standing demand for the 8th Pay Commission (8th CPC) by central government employees and pensioners took a step forward earlier this year when Prime Minister Narendra Modi announced in January 2025 that the commission would be set up. The PM assured that the move would improve the quality of life for employees and boost consumption in the economy.

However, more than seven months after the announcement, the government has yet to issue a formal notification establishing the commission. This delay means the names of the chairperson and members of the commission have not been finalized.

Why the Delay?

According to the Finance Ministry, the process has been delayed because the Terms of Reference (ToR) — which define the scope of work and responsibilities of the commission — are still under discussion.

Back in January and February 2025, the ministry sought inputs from various ministries, state governments, and departments on the draft ToR. Officials say suggestions are still being received, which has pushed the notification timeline further.

This has left lakhs of central government employees and pensioners waiting for clarity on when the 8th Pay Commission will officially begin work.

Possible Implementation Timeline

If everything proceeds smoothly and the ToR is finalized soon, the recommendations of the 8th CPC could be implemented from January 1, 2026.

However, experts caution that the entire process may take longer — at least 1.5 to 2 years. For instance, the 7th Pay Commission was announced in September 2013, but its functioning began only in February 2014. Given that over 237 days have already passed since the January 2025 announcement, the timeline is already behind schedule.

This suggests that employees and pensioners may not see the actual benefits until late 2026 or even 2027.

The Role of Dearness Allowance (DA)

A key factor in the 8th Pay Commission’s recommendations will be the All-India Consumer Price Index for Industrial Workers (AICPI-IW). This index is used to calculate both Dearness Allowance (DA) for employees and Dearness Relief (DR) for pensioners.

The July 2025 data showed the index rising by 1.5 points to 146.5, which will directly impact DA calculations. These revised DA figures will, in turn, play a critical role in deciding the fitment factor and minimum basic pay under the new pay commission.

Expected Benefits for Employees and Pensioners

Experts suggest that the fitment factor — which is used to calculate the revised pay — may fall in the range of 1.8 to 2.46. This could result in an increase of up to 13% in take-home salaries for central government employees.

Pensioners will also see a proportional rise in their basic pension based on the revised fitment factor. Once the new pay structure is implemented, DA will reset to zero and start afresh.

Employee Associations Demand Faster Process

Employee unions and pensioner associations have been urging the government to expedite the process. They argue that the rising cost of living, reflected in higher inflation, has already put financial pressure on households, making early implementation of the pay commission critical.

The demand is also being linked to consumption growth, as higher disposable income among millions of central employees and pensioners would have a ripple effect on the economy, boosting demand in key sectors such as housing, automobiles, and consumer goods.

Key Takeaways

The 8th Pay Commission was announced in January 2025, but the notification is pending.
Delay is due to ongoing consultations over the Terms of Reference (ToR).
If implemented on schedule, recommendations could apply from January 1, 2026.
In reality, employees and pensioners may see benefits only by late 2026 or 2027.
The AICPI-IW index will play a major role in determining salaries and pensions.
A fitment factor of 1.8–2.46 could increase in-hand salaries by up to 13%.

For now, central employees and pensioners must wait patiently as the government finalizes the framework of the 8th Pay Commission. The sooner the ToR is finalized and the commission is notified, the quicker the recommendations can be implemented — potentially offering relief to millions of households.