How pay commissions decide salary hikes of central govt staff

The Eighth Central Pay Commission (CPC)is set to revise the compensation structure for over 4.7 million central government employees & 6.8 million pensioners.The fitment factor serves asa multiplier applied to an employee’s existing basic pay to determine the revised basic pay.

- KR Shanmugam

Objectives of the pay commissions

SINCE INDEPENDENCE, EIGHT CPCS have been established - in 1946, 1957, 1970,1983, 1994, 2006, 2013 and now 2025.Common objectives include adjusting pay and allowance in line with the cost of living, reducing the gap between the lowest and highest pay levels from a 1:40 ratio (₹55 and ₹2,000) initially to 1:14 (#18,000 and ₹2,50,000) under the 7th CPC, simplifying the pay structures by minimising the number of pay scales (from 51 to 34 by the 5th CPC) and introducing structural reforms to boost efficiency and performance linked incentives. The 7th CPC scrapped the 'grade pay'system and introduced a matrix-based pay system (Levels 1-18).

The 8th CPC will assess the overall economic situation, fiscal prudence, availability of resources, and the likely impact of its recommendations on state finances. It will review salary structure, benefits and working conditions in public sector units and the private sector. It will also assess the unfunded liabilities of the non-contributory pension system, in the light of the recent decision to transition from the National Pension Scheme (NPS) to the Unified Pension Scheme for pre-2004 recruits.

Rationale for pay revisions