A likely 1.8 fitment factor could mean about a 13% hike for central staff. Here is how it affects basic pay, DA and allowances.
New Delhi: The Union government has constituted the 8th Pay Commission to revise salaries and pensions for central government employees and retirees, according to Union Minister Piyush Goyal. Kotak Institutional Equities expects a 1.8 fitment factor, implying roughly a 13 percent increase. Here is why the fitment factor matters, how it works, and what it could mean for your paycheck when the new structure takes effect.
Why the fitment factor matters
The fitment factor is a single multiplier used to carry your current basic pay into the new pay matrix. It sets the floor for revised basic pay and pensions, which in turn determine most allowances.
It is set after considering inflation, employee needs, and the government’s fiscal room.
Under the 7th Pay Commission in 2016, the factor was 2.57 and the minimum basic was set at ₹18,000. When a new commission takes effect, dearness allowance (DA) resets to zero because the base index is recalibrated.
How it affects your salary
A higher fitment factor raises your basic pay and pension. Since HRA and several allowances are linked to basic pay, they also move up once the new pay matrix begins.
Because DA resets to zero at rollout, the actual increase in overall salary is smaller than the fitment multiplier might suggest. In 2016, Mint estimated the effective increase at 14.3 percent under the 7th Pay Commission.
What is expected this time
Piyush Goyal has said the Cabinet approved setting up the 8th Pay Commission to review pay, pensions, and allowances.
Kotak Institutional Equities estimates the 8th Pay Commission fitment factor could be around 1.8. On that basis, analysts expect an overall salary bump of about 13 percent for central government employees. The final number will be known only after the Commission submits its report and the Cabinet clears it.
Impact on employees and pensioners
Basic pay and pensions would rise on day one of implementation.
HRA and other allowances tied to basic pay would be recalculated on the new basic.
DA would restart at zero and then rebuild with subsequent revisions.
The minimum basic could move from ₹18,000 to about ₹32,400 if 1.8 is adopted, subject to the final pay matrix.
What makes up a typical central government salary
These are approximate shares and can vary by level and city.
| Component | Typical share of total pay |
|---|---|
| Basic Pay | 51.5% |
| Dearness Allowance (DA) | 30.9% |
| House Rent Allowance | 15.4% |
| Transport Allowance | 2.2% |
Indicative basic pay mapping if the factor is 1.8
Final figures depend on the notified pay matrix. HRA is shown at 24% only for illustration and varies by city class.
| 7th CPC Basic (₹) | Indicative 8th CPC Basic at 1.8 (₹) | HRA at 24% on new basic (₹) |
|---|---|---|
| 18,000 | 32,400 | 7,776 |
| 25,500 | 45,900 | 11,016 |
| 35,400 | 63,720 | 15,293 |
| 44,900 | 80,820 | 19,397 |
| 56,100 | 100,980 | 24,235 |
Estimate your pay under a 1.8 factor
Find your current 7th CPC basic pay from your payslip. Ignore DA, HRA and other allowances for this step.
Multiply that basic by 1.8 to get an indicative 8th CPC basic.
Reset DA to 0. DA will restart and be revised periodically under the new index.
Recalculate HRA and any allowances that are a percent of basic using the new basic and your city’s applicable rates.
Add fixed allowances like Transport Allowance as per your level and city. These may be revised in the 8th CPC notification.
Compare your old gross to the new gross to gauge the change. Remember that DA was included earlier but restarts at zero, which is why the effective increase tends to be near 13 percent.
Account for income tax and NPS or GP Fund deductions to estimate take-home.
The 7th Pay Commission took effect in 2016 with a 2.57 fitment factor and set the minimum basic at ₹18,000. Although the multiplier was 2.57, the overall pay increase was much lower because DA reset to zero and then rebuilt over time. Mint had pegged the effective rise at 14.3 percent at rollout.
Salary components typically include basic pay, DA, HRA and Transport Allowance. Several allowances are directly linked to the basic, so any change in basic pay tends to ripple through the rest of the package.
The 8th Pay Commission has been constituted and is expected to recommend a new pay matrix along with a fitment factor. Kotak Institutional Equities expects a 1.8 factor, implying about a 13 percent salary increase, though the final decision rests with the government. Employees should watch for the Commission’s report and the Cabinet’s approval, which will confirm the fitment factor, pay matrix and allowance rates.
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