The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the formation of the 8th Central Pay Commission on January 16, 2025, according to official records cited by Vajiram & Ravi — though Mathrubhumi claims the decision came on November 3, 2025, creating immediate confusion over timing. Led by former Supreme Court judge Justice Ranjana Desai, the commission will review salaries, pensions, and service conditions for over 50 lakh central government employees and 65–69 lakh pensioners. But what’s unfolding isn’t just a routine pay revision — it’s a brewing political and social storm.
What’s at Stake for Employees and Pensioners?
The commission’s mandate is clear: recommend revisions while maintaining fiscal discipline. But the real tension lies in what’s been left out. The National Council Joint Consultative Machinery (NC JCM), representing over 20 major employee unions, has sent a blistering letter to Finance Minister Nirmala Sitharaman. Their demand? Restore the Old Pension Scheme (OPS) for the 26 lakh employees forced into the National Pension System (NPS) in 2004. That’s not a technicality — it’s a life-changing issue for thousands who retired expecting defined benefits, not market-linked uncertainty.
They’re also asking for a 20% interim relief for both employees and pensioners until the final report is out. Why? Because the current Dearness Allowance (DA) of 42% is barely keeping pace with inflation. A 3% DA hike adds just ₹540 to the minimum salary of ₹18,000 — a drop in the ocean when groceries and medicines keep rising. The NC JCM argues: if the government can afford to form a commission, it can afford to ease pain now.
The Numbers: What Could Your Salary or Pension Be?
Projections vary wildly. Vajiram & Ravi suggests a fitment factor of 2.28, which would lift the minimum basic pay from ₹18,000 to ₹41,000 — a 34.1% jump. But News18, citing Ambit Capital, warns the real range could be between 1.83 and 2.46, meaning salaries could land anywhere from ₹32,940 to ₹44,280. That’s a difference of over ₹11,000 per month — enough to change a family’s entire financial trajectory.
Pensioners aren’t left behind. The current minimum pension of ₹9,000 could climb to ₹20,500–₹25,740, according to Vajiram & Ravi. But here’s the catch: once the new structure kicks in, Dearness Relief (DR) — the inflation-adjusted top-up pensioners rely on — will be absorbed into the base. That means no more separate DR payments. For many, this could feel like a hidden cut, even if the headline number looks higher.
By January 2026, DA is expected to hit 70%, and it will be merged into the salary calculation. That’s a structural shift — not just a raise. It’s the government acknowledging that inflation isn’t temporary. But it also means future adjustments will be harder to track, and transparency will be critical.
Why the Old Pension Scheme Matters — And Why It’s Controversial
The push to revive OPS isn’t nostalgia. It’s fairness. Employees hired before 2004 got a guaranteed monthly pension based on last drawn salary and years of service. Those hired after got a contributory system — 10% of salary goes in, and the rest is invested in markets. The returns? Volatile. Some get decent payouts. Others, especially those who joined in their 40s, face poverty in retirement.
A senior citizens’ body, echoing decades of precedent since the 5th Pay Commission, argues: “Similar revision and fitment benefits should be extended to all existing pensioners and family pensioners to ensure uniformity and social security.” That’s the moral core of the demand. Why should two people who did the same job, one hired in 1998 and the other in 2005, retire with radically different security?
The government’s stance? Fiscal responsibility. Reviving OPS for 26 lakh employees could cost over ₹1.2 lakh crore annually — a massive hit to the budget. But unions counter: the 6th Pay Commission in 2008 delivered a 54% hike without collapsing the economy. And this time, the economy is stronger.
What Happens Next — And When?
The commission has 18 months to submit its report. If they deliver by mid-2026, implementation won’t start until January 1, 2027 — or later. But the NC JCM is pushing hard to make January 1, 2026 the official effective date in the Terms of Reference. That’s ambitious. Historically, pay commissions take 18–24 months after submission to roll out changes. The 7th CPC took 21 months.
Meanwhile, the government is under pressure to amend the Terms of Reference. The phrase “unfunded cost of non-contributory pension schemes” was removed — a subtle but significant shift. Unions see it as erasing their historical claims. They want it back. They want OPS explicitly listed as an item for review. They want clarity on family pensions for pre-7th CPC retirees. These aren’t bureaucratic niceties — they’re survival issues.
What’s Missing From the Debate?
One glaring gap: no one is talking about the impact on state government employees. Over 1.2 crore state workers are watching this closely. If the Centre revises pensions upward, states — many already cash-strapped — will face immense pressure to follow. That could trigger a fiscal domino effect across India.
Also absent: a clear plan for CGHS (Central Government Health Scheme) affordability. Rates are frozen, but medical inflation is at 8%. A ₹41,000 salary means little if a hospital bill wipes it out.
And then there’s the question of timing. Why approve the commission in January 2025, yet have Mathrubhumi cite a 2025 date months later? The confusion isn’t just a typo — it’s a symptom of deeper disarray. Is the government unsure of its own priorities?
Frequently Asked Questions
Will the Old Pension Scheme be restored for all employees?
No definitive decision has been made. While the NC JCM and senior citizens’ groups are demanding full restoration of the Old Pension Scheme for the 26 lakh employees shifted to NPS in 2004, the government has so far resisted, citing fiscal constraints. Any reversal would require parliamentary approval and an estimated ₹1.2 lakh crore annual outlay — a major budgetary challenge.
How much could my basic salary increase under the 8th Pay Commission?
Projections vary: a fitment factor of 1.83 would raise the minimum basic pay from ₹18,000 to ₹32,940, while 2.46 could push it to ₹44,280. Vajiram & Ravi estimates 2.28, which would mean ₹41,000. The actual figure depends on the commission’s final recommendation, but most experts agree a 25–35% increase is likely, with DA merging into base pay by January 2026.
When will the new pay and pension structure take effect?
The commission must submit its report within 18 months of formation — likely by mid-2026. Implementation typically takes another 18–24 months after submission, meaning most employees won’t see changes before late 2027. However, the NC JCM is pushing to make January 1, 2026, the official effective date, though this is unlikely without a government amendment to the Terms of Reference.
Will pensioners get a separate Dearness Relief after the revision?
No. Once the revised pay and pension structure is implemented, Dearness Relief (DR) will be fully merged into the base pension. This means no more separate DR payments — inflation adjustments will be baked into the monthly amount. While this simplifies payments, it removes transparency, making it harder for pensioners to track real value changes over time.
What’s the impact on state government employees?
State employees aren’t directly covered, but they’re watching closely. If the Centre increases pensions or salaries significantly, states — many already under fiscal stress — will face immense pressure to match the hikes. This could trigger a nationwide wage spiral, straining state budgets and potentially leading to delayed payments or service cuts in public sectors like education and healthcare.
Why is there confusion over the approval date of the 8th Pay Commission?
The Union Cabinet approved the commission on January 16, 2025, as per official notifications. However, Mathrubhumi reported a November 3, 2025 date — a clear error or misreporting. This inconsistency has fueled public skepticism about the government’s communication clarity. In a matter affecting millions, such discrepancies erode trust — especially when timelines and financial impacts are already uncertain.
