8th Pay Commission: The moment they hear the words “8th Pay Commission,” millions of central government employees start calculating their salary increases. Until now, the general belief was that when the 8th Pay Commission comes into effect on January 1, 2026, all Dearness Allowance (DA) up to that date would be added to the basic pay, and then the new salary would be determined by applying a fitment factor.
The entire DA will not be merged
Now, a major and shocking twist appears to be emerging in this story. Sources and experts indicate that the government is not in the mood to merge the entire 60-61% DA. Contrary to your expectations, only 50% of the DA may be included in the basic pay. If this happens, it will change the entire calculation of your salary. What is this new twist, and why might the government do this? Let’s delve deeper into the matter.
What is the general expectation and where is the catch?
Employees are expecting their DA to reach approximately 61% by January 1, 2026. When the 8th Pay Commission is implemented, this entire 61% will be added to their basic pay, creating a larger “revised basic pay.” This will then be subject to a fitment factor. However, the real story may be different.
Twist in the tale: Why only 50% DA merged, not 61%?
This angle is surprising, but some solid arguments are being made behind it. 1. The 50% DA ‘Rule’: An established rule states that whenever DA reaches 50%, it should be merged into the basic salary. DA reached 50% in January 2024, but the government did not merge it then. Experts believe that the government deliberately withheld this merger for the 8th Pay Commission and may use this 50% benchmark as the basis, rather than 61%. 2.
The 7th Pay Commission Example:
When the 7th Pay Commission was implemented in 2016, the government calculated the DA by merging the total DA at that time. The base year was also changed. This resulted in a financial burden for the government. However, this time something different is being considered for the calculation. 3. The government’s financial discipline is the biggest reason. If the government merges the entire 61% DA, employees’ revised basic pay will increase significantly. Allowances like HRA and TA will also increase proportionately on top of this increased basic pay, placing a significant burden on the government treasury. By merging just 50% of the DA, the government can significantly control this financial burden.
How much will it affect your pocket?
Let us see from a comparative table that if 61% DA is merged and if only 50% DA is merged, then how big will be the difference in your revised basic pay, on which the fitment factor will be applied later. Current Basic Pay Scenario A: 61% DA merger (Employees’ expectation) Scenario B: 50% DA merger (Government’s likely move) Difference (Impact on your pocket) ₹30,000 ₹30,000 + ₹18,300 = ₹48,300 ₹30,000 + ₹15,000 = ₹45,000 ₹3,300 less ₹50,000 ₹50,000 + ₹30,500 = ₹80,500 ₹50,000 + ₹25,000 = ₹75,000 ₹5,500 less ₹80,000 ₹80,000 + ₹48,800 = ₹1,28,800 ₹80,000 + ₹40,000 = ₹1,20,000 ₹8,800 less This difference is only in the revised basic pay. When a fitment factor of 1.92 or more is applied to this, the difference in final salary will become even larger.
Is changing the base year a part of this ‘game’?
There’s another important angle to this story: the change in the base year. Currently, the base year for DA calculations is 2016 = 100. It’s highly likely that the government will change the base year to 2026 = 100 with the implementation of the 8th Pay Commission. If the base year is changed, the entire method of DA calculation will be reset. In this case, there will be no technical basis for merging 61% DA, making it easier for the government to argue that merging the 50% benchmark is a fresh start.
What is the government’s ‘masterplan’? Will the base year change?
Dearness Allowance (DA) is calculated based on data from the Consumer Price Index for Industrial Workers (AICPI-IW). This index has a base year against which inflation is compared. Currently, the base year for DA calculations is 2016. This was set when the 7th Pay Commission was implemented. Now, with the 8th Pay Commission scheduled to be implemented from January 1, 2026, the government may change the base year for DA calculations to 2026. Changing the base year is like resetting the score of a game. When the base year is new, the calculation of dearness allowance also starts afresh, i.e., from zero.
Why is the base year being changed?
Over the past decade, people’s spending patterns, their needs, and the nature of inflation have completely changed. The things we spend on today are very different from those in 2016. Therefore, updating the base year is essential to accurately assess inflation and provide real benefits to employees.
What will change in DA calculation?
Let us understand from a table what will be the difference between the current system and the new possible system. Parameter 7th Pay Commission (current system) 8th Pay Commission (probable system) Base year of DA 2016 2026 (probable) What happened to the old DA? 125% DA was merged in the basic salary. 60-61% (estimated) DA will be merged in the new basic salary. DA started from 0%. Will start from 0%. Calculation based on 2016 prices. Based on 2026 prices. End result Basic salary increased, total salary increased. New basic salary will increase even more, there will be a big jump in total salary.
How will this work?
1. Step 1 – Merger By January 1, 2026, your dearness allowance will have reached approximately 60-61%. Once the 8th Pay Commission is implemented, 50% of this DA will be added to your current basic salary. This will create your ‘new basic salary,’ which will be significantly higher than before. 2. Step 2 – Reset Once the old DA is added to your basic salary, the DA counter will be reset to 0%. Any subsequent dearness allowance increase will be calculated on this new and increased basic salary. This is exactly what happened with the 7th Pay Commission. When it was implemented in 2016, the 125% dearness allowance was merged into the basic pay, and the DA was reduced to zero.
What will be the impact on your salary?
This change is beneficial for you. Why? Because when your future DA (e.g., 2%, 3%, or 4%) is calculated on your new, higher basic salary, the amount you receive will be higher. This will allow your total salary to grow even faster over time.
When will the 8th Pay Commission be implemented?
The government is expected to constitute the 8th Pay Commission panel by the end of 2025. It takes the panel 15 to 18 months to submit its recommendations. It’s estimated that the report could be ready by March 2027. Regardless of when the recommendations are made, they are expected to be implemented from January 1, 2026. This means you’ll also receive the benefit of arrears.’
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