Cabinet Approves 8th Pay Commission Formation; Salary Hike Expected for 50 Lakh Central Employees

The Union Cabinet has approved the formation of the 8th Pay Commission to revise salaries and pensions for central government employees. Around 50 lakh employees and 69 lakh pensioners are expected to benefit from the decision.

New Delhi, October 28, 2025 – The Union Cabinet on Monday approved the formation of the 8th Pay Commission, marking an important decision that will directly impact nearly 50 lakh central government employees and around 69 lakh pensioners. The new commission will recommend revisions in pay, allowances, and pensions to keep them in line with current economic conditions and the rising cost of living.

As per government sources, the 8th Pay Commission will submit its report within 18 months, and its recommendations are expected to be implemented from January 1, 2026. The government usually revises the pay structure of its employees once every ten years, and this move continues that tradition after the 7th Pay Commission, which came into effect in 2016.

Officials suggest that the fitment factor, which determines how much the basic salary will rise, may increase from 2.57 (under the 7th Pay Commission) to 3.68 or more under the new system. This change could push the minimum basic salary of central employees from ₹18,000 to about ₹26,000 or ₹27,000 per month. Including allowances, the overall monthly income could go up to nearly ₹44,460, resulting in an average hike of 25% to 35%.

The decision will also benefit 69 lakh pensioners, who will receive higher pensions once the new pay matrix is implemented. This will bring parity between serving employees and retirees, ensuring that the latter also get relief from the rising cost of living.

The approval of the 8th Pay Commission comes at a time when inflation and expenses have been steadily climbing. Over the past few months, employee unions and associations have been urging the government to initiate the pay revision process, pointing out the increasing financial burden on middle-income families due to inflation, education costs, and housing expenses.

Experts say that while the move will bring significant relief to employees, it will also increase the government’s financial burden. When the 7th Pay Commission was implemented in 2016, it cost the exchequer around ₹1.02 lakh crore annually. The financial impact of the 8th Pay Commission is expected to be higher, though exact figures will depend on the commission’s final report.

Economists also note that the salary hike could stimulate consumer demand in key sectors such as housing, automobiles, and consumer goods. Higher disposable income among government employees and pensioners may help boost overall consumption, which in turn could support economic growth amid global economic challenges.

A senior government official said that the decision was taken to ensure fair compensation for central employees and to maintain parity with rising living costs. The commission will also review existing allowances and performance-linked incentives to make the structure more balanced and transparent.

Once the 8th Pay Commission completes its study and submits the report, the government will review its recommendations before final approval. If all goes as planned, the new pay structure will likely take effect from January 2026, bringing much-needed financial relief to millions of employees and pensioners across the country.

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