Union Cabinet Approves 8th Pay Commission Set for January 2026

The Union Cabinet has approved the formation of the 8th Pay Commission, which is set to take effect on January 1, 2026. This decision, made under the leadership of Prime Minister Narendra Modi, will significantly impact the salaries, pensions, and allowances of central government employees and retirees. The new framework aims to reassess the basic pay structure and recalibrate the Dearness Allowance (DA) to better align with current inflation rates.

As the implementation date approaches, central government employees are eager for updates regarding their salary revisions and pension security. The upcoming Pay Commission is expected to revise not only basic pay but also retirement pensions and various allowances, which will affect a substantial number of employees across multiple departments.

Projected Salary Increases and Employee Impact

While the government has not yet disclosed specific percentage increases, preliminary estimates suggest a notable rise in basic pay. According to media reports, the minimum basic salary for a central government employee could increase from Rs 18,000 to as much as Rs 51,480, depending on the final fitment factor.

This adjustment is anticipated to affect nearly 50 lakh central government employees, which includes defense personnel, as well as approximately 65 lakh pensioners, including retired armed forces staff. Traditionally, pay commissions are established every ten years to evaluate wage structures and pension benefits, balancing employee welfare with the government’s fiscal responsibilities.

Clarifications on DA Hikes and Pension Security

In December 2025, concerns arose regarding whether pensioners would continue to receive DA hikes following the introduction of the new Finance Act. The government quickly addressed these concerns, categorically denying claims that DA benefits would be eliminated. In a social media statement on December 13, authorities labeled such claims as “fake.”

The government clarified that post-retirement benefits, including DA hikes and adjustments linked to the Pay Commission, would only be revoked under exceptional circumstances. Specifically, Rule 37 of the CCS (Pension) Rules, 2021 was amended to stipulate that if an absorbed Public Sector Undertaking (PSU) employee is dismissed for misconduct, their retirement benefits may be forfeited.

One of the most scrutinized elements of the 8th Pay Commission is the fitment factor, which determines how salaries are adjusted from existing basic pay. Analysts indicate that the Commission will consider various factors, including inflation trends, the erosion of real wages, and the government’s revenue capacity. These considerations have remained relatively stable since the last pay commission in 2015.

Initial projections suggest that the fitment factor could rise to 2.57, potentially benefiting nearly one crore employees and pensioners. However, expectations vary widely. “While the government has not declared an official number yet, early expectations place the 8th Pay Commission fitment factor in the range of 1.83 to 2.57,” noted CA Chandni Anandan, a tax expert at Clear Tax, in an interview with Mint.

Despite the previous Pay Commission utilizing a fitment factor of 2.57, this does not guarantee a proportional salary increase in the upcoming adjustments. As details continue to unfold, central government employees and retirees remain vigilant, awaiting further announcements regarding their financial futures.