8th Pay Commission: With the Modi government announcing the 8th Pay Commission, all eyes are on how the next salary and pension revision for around 1.2 crore central government employees and pensioners will be done.
The Centre is very soon expected to announce the composition of the 8th Pay Commission, which will have two members under a chairman. Once it is officially formed, consultations with stakeholders will start to propose revised salaries and pensions for central government employees to the government.
It is expected that, as it happened with the 7th Pay Commission, the 8th Pay Commission will also use the Aykroyd formula to arrive at a decision concerning salary and pension hikes to be proposed for central government staff, considering the current economic realities. Let’s first understand the Aykroyd formula and how it shaped the 7th pay panel recommendations.
What is the Aykroyd Formula?
The Aykroyd formula was developed by Dr. Wallace Aykroyd, a nutritionist, to estimate the minimum cost of living. The formula suggested calculating wages based on the nutritional requirements of an average worker. Aykroyd focused on the essential needs of a worker, such as food, clothing, and housing, to develop the formula for calculating an ideal wage.
The formula was adopted by the 15th Indian Labour Conference (ILC) in 1957 to set minimum wages for a worker and their family, which includes a spouse and two children (equal to three consumption units).
The Aykroyd formula, stressing having a balanced diet including specific amounts of protein and fat, suggested a minimum of 2,700 calories for an adult to decide fair wage norms. The formula also highlights the importance of including animal proteins, like milk, eggs, and meat, for their higher nutritional value.
How Aykroyd Formula was used in the 7th Pay Commission
The 7th Pay Commission had raised the minimum basic pay from Rs 7,000 to Rs 18,000 for central government employees, using the Aykroyd formula. This salary hike was calculated based on the cost of living and nutritional requirements at the time.
The 7th pay panel used a fitment factor of 2.57 to revise the salary and pension of central government employees and pensioners almost 10 years ago. That pay matrix based on this fitment factor, using the Aykroyd formula, has been used since 2016, when the recommendations of the 7th Pay Commission were implemented.
This pay matrix structured pay levels and annual progressions while using the Aykroyd formula as a basis for calculating the minimum pay. This approach considered inflation to ensure fair and need-based wages.
What to expect from the 8th Pay Commission
The 8th Pay Commission is likely to use a similar approach, combining the Aykroyd formula with updated market data to ensure salaries align with current living costs.
Based on reports, there are speculations that the government might go for a fitment factor in the range of 1.92 to 2.86. If the 2.86 fitment factor is considered, the minimum basic salary of a government employee would go up to Rs 51,480, up from the current minimum salary of Rs 18,000. Similarly, pensions would be hiked to Rs 25,740, up from Rs 9,000.
Salary and pension hikes are calculated by multiplying the fitment factor by the previous minimum salary or pension amount.
While these likely fitment factors are mere speculations, they may hold less significance compared to what the 8th Pay Commission ultimately recommends and what the government finally approves. The accepted fitment factor will serve as the basis for revising salaries and pensions for the staff.
What lies ahead for central government employees awaiting the 8th Pay Panel members’ appointment?
With the announcement now made, the 8th Pay Commission, once appointed, will start its work. If appointed this month, the three-member panel will have approximately 11 months to submit its recommendations to the government. Among various responsibilities, the commission will recommend the fitment factor. In addition to this, the panel will also propose other key modalities.