Established by the central government every 10 years to revise the allowances, pay and pensions of its employees, the Central Pay Commission (CPC) is responsible for decisions on contributions, retirement benefits and government spending.
All central government and retired former servicemen are impacted by the revisions. The current panel is the Centre’s eight since Independence.
Constituted by Prime Minister Narendra last year, the 8th CPC is set to make big decisions on salary hikes and fitment factor, based on which updated compensation for central government employees and pensioners will be finalised. It had issued Terms of Reference (ToR) in November last year and since then, there has been much speculation over implementation of the salary hikes, arrears, amendments and proposed changes to pension structures.
Who benefits from revisions by 8th CPC?
As many as 50 lakh central government employees, including defence personnel, and around 65 lakh retired central government pensioners, including defence , could see basic salary rise to ₹51,480 from ₹18,000.
Notably, there are 18 levels of employees, and the individual hikes will depend on the level of the employee or as basic pay of these employees differs from level to level.
Is 8th CPC applicable for state govt, bank employees?
The 8th Pay Commission is not directly applicable to state employees, as it only covers central personnel, as per a report by Clear Tax. It however added that most states conduct their own independent reviews and eventually adopt similar pay structures following cabinet approvals.
Notably, the 8th CPC also does not apply to bank employees. These salaries are revised under the Indian Banks’ Association () agreements, the report added.
How will the 8th Pay Commission make its decisions?
The 8th Pay Commission is chaired by Former Supreme Court Justice . Other members on the panel are Professor Pulak Ghosh, tenured Professor of Finance, Member of the Economic Advisory Council to the Prime Minister, as a Member of the Commission and Pankaj Jain, former IAS, as Member-Secretary.
The panel will gather views and inputs from employee unions, groups, ministries, pension bodies and other similar stakeholders, which will then be analysed to decide allowances, pension formula and salary structures for the relevant employee and retiree groups.
Discussions and feedback from stakeholders are also solicited before the Commission provides its final recommendations. Notably, it opened formal memorandum submissions and scheduled stakeholder consultations in March, April and May.
How long does it take from recommendations to be implemented?
The 8th Pay Commission was notified on 17 January 2025 and scheduled to come into force by 1 January 2026. However, the panel is at present in phase, and final recommendations are still pending.
Notably, when we use the previous pay commission timelines as reference, the process is a lengthy one. The 7th Pay Commission took two and a half years from formation to rollout, and the 6th Pay Commission took two years; while the 5th Pay Commission took three and a half years to be implemented.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.