New Delhi
Central government employees and pensioners across the country are keeping a close watch on the news related to the upcoming 8th Pay Commission. This is expected to increase a tremendous increase in salary and pension. According to a recent report by Ambit Capital, the new salary structure may increase the total remuneration by 30–34%, which will affect more than 1 crore employees and retired employees across the country. If it is implemented, this amendment can be applicable by 2026 or financial year 2027, and this may cost a heavy burden of Rs 1.8 lakh crore on the government exchequer.
What is detail
The current pay and pension structure is based on the Seventh Pay Commission, which came into force in January 2016. Considering the cost of living, inflation and economic changes, a new commission is usually formed every ten years to amend the pay structure. It is expected that this tradition will also continue by the Eighth Pay Commission and a revised pay scale will be offered for the central government employees including defense personnel and pensioners.
Pausing Factor to speed up salary hike
One of the main components of the expected amendment is the fitment factor – a multiplier that is used to fix the new basic salary. Ambit Capital estimates that the fitment factor for the Eighth Pay Commission may be between 1.83 and 2.46. This means that at present the minimum wage of Rs 18,000 can increase to Rs 32,940 (at 1.83) or Rs 44,280 (at 2.46). For example, the current Aadhaar of Rs 50,000 can be increased to Rs 91,500 at the lower end of the fitment factor and Rs 1.23 lakh at the upper end. The revised structure is also expected to align dearness allowance more accurately with inflation and update pension payment accordingly.
Promotion of consumption and economic development
Experts believe that the new Pay Commission will serve as a catalyst for economic development, as increased salary may increase consumption, better access to healthcare, better housing and entertainment. The widespread impact of increment on such a large employee base can have a profound impact on retail, real estate and service sectors.