The 8th Pay Commission is still some time away from submitting its recommendations, but one question is already on the minds of millions of central government employees – how much will their salary increase? While much of the discussion has centred around the fitment factor, another important component that could see a corresponding increase is House Rent Allowance (HRA).
Since HRA is calculated as a percentage of an employee’s basic pay, any increase in basic pay through a higher fitment factor automatically pushes up the HRA as well. This means employees should look beyond the revised basic salary to understand how their overall monthly income may change.
The latest illustrative calculations by BankBazaar show how HRA could change under different assumed fitment factors across various pay levels. While the estimates cover Levels 1, 4, 6, 8 and 10, it is important to note that the Central Civil Services (Revised Pay) Matrix currently has 18 pay levels, ranging from Level 1 to Level 18. The figures are only examples to help employees understand the possible impact under different scenarios. The final revision will depend on the recommendations of the 8th Pay Commission and the government’s approval.
Why HRA matters as much as the salary hike
Whenever a new Pay Commission is implemented, attention usually shifts to the fitment factor because it determines the revised basic pay. However, the increase does not stop there.
Several allowances are linked to the revised basic pay, with HRA being one of the biggest monthly benefits for employees living in rented accommodation. Currently, HRA is paid at 30%, 20% and 10% of basic pay for employees posted in X, Y and Z category cities, respectively.
This means that even a small change in the fitment factor can significantly increase an employee’s take-home salary.
“The headline salary increase often gets the most attention, but it is only part of the picture. A change in the fitment factor also affects salary-linked components such as HRA because they are derived from basic pay. Comparing different fitment factor scenarios gives employees a more realistic understanding of how their monthly income could change, instead of relying on a single estimate. This can be useful while planning household finances, although the final impact will depend on the recommendations accepted by the government,” says Adhil Shetty, CEO, BankBazaar.
How different fitment factors change HRA
To understand the impact, BankBazaar has prepared illustrative calculations using four assumed fitment factors—2.0, 2.1, 2.28 and 2.57.
| Level | Basic Pay | Fitment Factor | Revised Basic | HRA (X – 30%) | HRA (Y – 20%) | HRA (Z – 10%) |
| 1 | ₹ 18,000 | 2 | ₹ 36,000 | ₹ 10,800 | ₹ 7,200 | ₹ 3,600 |
| 2.1 | ₹ 37,800 | ₹ 11,340 | ₹ 7,560 | ₹ 3,780 | ||
| 2.28 | ₹ 41,040 | ₹ 12,310 | ₹ 8,210 | ₹ 4,100 | ||
| 2.57 | ₹ 46,260 | ₹ 13,880 | ₹ 9,250 | ₹ 4,630 | ||
| 4 | ₹ 25,500 | 2 | ₹ 51,000 | ₹ 15,300 | ₹ 10,200 | ₹ 5,100 |
| 2.1 | ₹ 53,550 | ₹ 16,060 | ₹ 10,710 | ₹ 5,360 | ||
| 2.28 | ₹ 58,140 | ₹ 17,440 | ₹ 11,630 | ₹ 5,810 | ||
| 2.57 | ₹ 65,530 | ₹ 19,660 | ₹ 13,110 | ₹ 6,550 | ||
| 6 | ₹ 35,400 | 2 | ₹ 70,800 | ₹ 21,240 | ₹ 14,160 | ₹ 7,080 |
| 2.1 | ₹ 74,340 | ₹ 22,300 | ₹ 14,870 | ₹ 7,430 | ||
| 2.28 | ₹ 80,710 | ₹ 24,210 | ₹ 16,140 | ₹ 8,070 | ||
| 2.57 | ₹ 90,980 | ₹ 27,290 | ₹ 18,200 | ₹ 9,100 | ||
| 8 | ₹ 47,600 | 2 | ₹ 95,200 | ₹ 28,560 | ₹ 19,040 | ₹ 9,520 |
| 2.1 | ₹ 99,960 | ₹ 29,990 | ₹ 19,990 | ₹ 10,000 | ||
| 2.28 | ₹ 108,530 | ₹ 32,560 | ₹ 21,710 | ₹ 10,850 | ||
| 2.57 | ₹ 122,330 | ₹ 36,700 | ₹ 24,470 | ₹ 12,230 | ||
| 10 | ₹ 56,100 | 2 | ₹ 112,200 | ₹ 33,660 | ₹ 22,440 | ₹ 11,220 |
| 2.1 | ₹ 117,810 | ₹ 35,340 | ₹ 23,560 | ₹ 11,780 | ||
| 2.28 | ₹ 127,910 | ₹ 38,370 | ₹ 25,580 | ₹ 12,790 | ||
| 2.57 | ₹ 144,180 | ₹ 43,250 | ₹ 28,840 | ₹ 14,420 | ||
| Disclaimer: Illustrative estimates based on assumed fitment factors and HRA rates. Final pay and allowances may vary. Source: BankBazaar.com | ||||||
For a Level 1 employee with the current basic pay of ₹18,000, the revised basic could range from ₹36,000 under a fitment factor of 2.0 to ₹46,260 under a fitment factor of 2.57. Accordingly, HRA for an employee posted in an X-class city could increase from ₹10,800 to ₹13,880, while employees in Y and Z cities could receive ₹9,250 and ₹4,630, respectively, under the highest illustration.
The impact becomes even larger at higher pay levels.
A Level 4 employee, whose current basic pay is ₹25,500, could see the revised basic increase to anywhere between ₹51,000 and ₹65,530, depending on the fitment factor. HRA in X cities would consequently range from ₹15,300 to ₹19,660.
For Level 6 employees, the revised basic could move from ₹70,800 to ₹90,980, with HRA in X cities rising from ₹21,240 to ₹27,290.
Similarly, a Level 8 employee with an existing basic pay of ₹47,600 could receive a revised basic between ₹95,200 and ₹1,22,330. HRA in X cities would increase from ₹28,560 to ₹36,700 under the highest assumed fitment factor.
At Level 10, where the current basic pay is ₹56,100, the revised basic could range from ₹1,12,200 to ₹1,44,180. HRA in X cities may increase from ₹33,660 to ₹43,250, while employees in Y and Z cities could receive ₹28,840 and ₹14,420, respectively, under the 2.57 illustration.
Why the fitment factor is closely watched
The fitment factor is the multiplier used to revise the existing basic pay of central government employees. A higher fitment factor results in a higher revised basic salary, which in turn increases salary-linked allowances such as HRA.
Although there has been considerable speculation about what the 8th Pay Commission may recommend, the government has not yet announced any fitment factor. As a result, estimates ranging from 2.0 to 2.57 remain purely illustrative and should not be treated as official projections.
What is the latest on the 8th Pay Commission?
The Union government announced the constitution of the 8th Central Pay Commission earlier this year. However, the commission is yet to be formally constituted with its chairman and members, and its Terms of Reference are also awaited.
Once constituted, the commission will examine salaries, pensions and allowances of central government employees and pensioners before submitting its recommendations to the government. The final implementation timeline and the fitment factor will become clear only after the commission completes its exercise and the recommendations are accepted.
What employees should keep in mind
For government employees, the discussion around the 8th Pay Commission should not be limited to the revised basic pay. Since HRA forms an important part of monthly income, understanding how it changes under different fitment factor scenarios provides a more complete picture of the possible salary revision.
At the same time, these calculations are only illustrative estimates. The actual increase in salary, HRA and other allowances will depend on the fitment factor and other recommendations finally approved by the government.
Disclaimer: The calculations mentioned above are illustrative estimates based on assumed fitment factors and current HRA rates for X, Y and Z category cities. Actual salary and allowance revisions under the 8th Pay Commission may differ depending on the recommendations accepted by the Government of India.
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