What is the 8th Pay Commission, and what are the benefits of the 8th Pay Commission?

What is the 8th Pay Commission?

• The Union government approved the establishment of the 8th Pay Commission, which is expected to benefit about 50 lakh employees and 65 lakh pensioners of the Union government, including serving and retired defence personnel.
• It will likely propose formulas for revising the Dearness Allowance (DA) and Dearness Relief (DR) for employees and pensioners to counter inflation.
• The DA adjustment is based on the Consumer Price Index for Industrial Workers(CPI-IW), released monthly by the Labour Bureau, to track cost-of-living changes.
• The 8th Pay Commission aims to align government salaries with the rising cost of living, supporting employee welfare and economic growth.

What is the Pay Commission (PC)?

• Appointment: The Central govt sets up the Pay Commission to review the salary structure, allowances, and retirement benefits of govt employees, considering inflation, economic conditions & market rates.
• Legal Status: It is an advisory body with no mandatory authority for the government to accept its recommendations.
• Frequency: Pay Commissions are generally formed every 10 years; the first one was established in 1946.
• Composition: The Pay Commission operates under the Department of Expenditure, Ministry of Finance, and comprises experts in various fields.
• Seventh Pay Commission: Headed by Justice A.K. Mathur, it raised the minimum salary to ₹18,000 and pension to ₹9,000, adding ₹1 lakh crore to the fiscal 2016-17 expenditure during fiscal year 2016-17.
• It assesses the pay scales, allowances, and benefits for central government employees, taking into account inflation and its impact on remuneration and the cost of living.
  1. A new PC is established every 10 years under the Department of Expenditure (Ministry of Finance) to revise salaries and pensions, ensuring fair compensation for government employees. Usually, a retired Supreme Court judge heads the PC.
  2. Its recommendations are often adopted by state-owned organizations as well.

Historical Context of Implications of PC:

• Since 1947, the Indian government has established 7 Pay Commissions, with the 7th Pay Commission (2016-2026) under the chairmanship of Justice Ashok Kumar Mathur.
• The 7th Pay Commission led to an increase of Rs 1 lakh crore in government expenditure in fiscal year 2016-17.

Difference between the 7th pay commission and the 8th pay commission?

What are the benefits of the 8th Pay Commission?

• Revised Scales of Pay: An overview study and standardization of all scales of pay with respect to present economic aspects. There should not be any uneven differences among different government sectors.
• Fitment Factor: Implementation of a new fitment factor is central to adjusting the basic pay of the employees. Thus, the proposed fitment factor would be roughly around 1.92, which will substantially elevate the minimum pay.
• Allowances Rationalization: Analysis and upgradation of many allowances such as DA, HRA, TA, etc. These are related to existing costs of living and inflation levels.
• Pension Scheme Reforms: Recommendations for pension structure reforms to ensure long-term financial security for the retirees. This includes higher pension benchmarks and streamlined pension formulas.
• Employee Well-being: Revised pay will enhance quality of life.
• Alignment with Economic Conditions: Revisions reflect current economic realities.
• Boost Economy: Higher salaries are expected to stimulate consumption and boost economic growth.
• Trickle-Down Effect: Often leads to similar pay revisions in PSUs & state govts.