The Centre is expected to form the 8th Pay Commission next week, just ahead of the Bihar assembly elections, and ten months after it was approved by the Cabinet, according to sources.
The panel will recommend the revised pay and pension norms for over 11.8 million central government employees and pensioners.
The government is understood to have finalised the terms of reference (ToR), along with the chairman and members of the Commission, to oversee the decadal revision of pay and pensions for central government staff.
The move comes at least a year behind schedule compared to historical precedents. The Commission is likely to take 6–12 months to submit its report, with implementation expected to apply retrospectively from January 1, 2026.
Prime Minister Narendra Modi had approved the constitution of the 8th Pay Commission on January 16, 2025, shortly before the Delhi assembly elections.
Inputs have also been gathered from key stakeholders, including state governments and PSUs.
While Pay Commission awards significantly boost consumption through salary hikes, they impose a substantial financial burden on state governments, public sector undertakings (PSUs), and central universities, which typically align their pay revisions with central recommendations.
The recommendations of the Pay Commission are not binding on the central government. However, they are generally accepted with minor modifications. The Commission advises on salary structures, allowances, pensions, and benefits for central government employees (civilian and defence) and pensioners.
For context, the 7th Central Pay Commission (CPC) was constituted on February 28, 2014, with an 18-month deadline. Implemented from January 1, 2016, it granted a 23.55% increase in pay and pension, resulting in an additional annual outgo of Rs 1.02 lakh crore (0.65% of GDP in FY17). This made it challenging to reduce the fiscal deficit from 3.9% in FY16 to 3.5% in FY17.
The fiscal impact of the 8th CPC is expected to be factored into the new medium-term fiscal consolidation road map and the recommendations of the 16th Finance Commission, which will determine tax devolution and grants to states for FY27–FY31.
Millions of state government employees are also likely to benefit, as states typically follow the central Pay Commission’s lead in revising salaries.