As the 8th Pay Commission begins formal work following last month’s notification of the Terms of Reference (ToR), anticipation is rising among central government employees and pensioners regarding the likely fitment factor. The fitment factor is crucial because it determines the revised basic salary and pension by acting as a multiplier to convert the old basic pay into the new pay structure.
8th Pay Commission Salary Hike Expectations
The government considers inflation, the cost of living index and Dr. Wallace R. Aykroyd’s formula while deciding the fitment factor. Aykroyd’s method determines need-based minimum wages by taking into account essential costs such as food, clothing and housing for a family consisting of a worker, spouse and two children. Under the 7th Pay Commission, the fitment factor was fixed at 2.57.
Fitment Factor, Possible Increase and Key Calculations Explained
According to the staff side of the National Council–Joint Consultative Machinery (NC-JCM), discussions are still underway and no final number has been confirmed. However, a July report by Ambit Capital suggested that the 8th Pay Commission’s fitment factor may fall in the range of 1.83 to 2.46. Ambit based its analysis on salary growth recorded across previous pay commissions. The report notes, “Depending on the salary growth seen over different Pay Commissions, the range of fitment factors the government could consider lies between 1.83 and 2.46.”
The final salary increase for employees will depend directly on the fitment factor the commission chooses. The 8th Pay Commission will revise basic salaries, pensions and allowances, benefiting more than 50 lakh central government employees and over 65 lakh pensioners. Ambit Capital estimates that the 8th Pay Commission may lead to a minimum real hike of around 14 percent in pay (including Basic Pay plus DA), while the maximum possible real increase could touch 54 percent. However, the report also highlights that a 54 percent hike is highly unlikely due to the significant financial pressure it would place on the government.
The report further mentions that while the government may consider a moderately higher increase to encourage consumption, expectations of an excessively large hike should remain realistic given fiscal constraints.
