8th Pay Commission Latest Update 2025: The central government has approved the Terms of Reference (ToR) of the 8th Pay Commission. Following this, preparations have begun for major changes to the salary structure of central employees.
The government has given the commission an 18-month deadline. During this time, dearness allowance (DA) and other allowances will continue to increase under the 7th Pay Commission system. Experts say that employees will also receive arrears from January 2026.
How long will the DA hike continue?
According to experts, until the 8th Pay Commission is implemented, DA will continue to be calculated based on the 7th Pay Commission’s basic salary. This arrangement will continue until the new pay structure is notified. Since DA is revised every six months, there is a possibility of three DA increases in an 18-month period. In July 2025, DA is 58%. If we assume an average increase of 3% per revision, DA could reach 61%, 64%, and 67%, respectively, in the next 18 months.
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How will the DA hike affect the fitment factor?
Manjeet Singh Patel, national president of the All India NPS Employees Federation, says that regular DA increases and two annual increases before the implementation of the 8th Pay Commission could impact employees’ basic pay by approximately 20%. Additionally, the recommendation to increase the family unit from 3 to 3.5 will also impact basic pay by an additional 20%.
Taking all these increases into account, the fitment factor could rise from 1.58 to approximately 1.98. The government typically adds an inflation growth factor of up to 15% to account for inflation, resulting in a fitment factor of approximately 2.13. Patel says this fitment factor is largely accurate.
Which allowances will continue to increase?
By the time the 8th Pay Commission is implemented, not only DA but many other allowances are also likely to increase.
Possible amendments in HRA
House Rent Allowance (HRA) is linked to both basic pay and DA. As DA increases, the HRA percentage is also revised once it crosses a certain threshold. Consequently, HRA slabs are likely to increase in cities falling into categories X, Y, and Z.
Transport Allowance (TA)
TA may also increase. Several analyses suggest that the TA amount may change under the 8th Pay Commission, although some allowances may be cut or rationalized.
Children’s Education Allowance (CEA)
Some estimates suggest that the CEA is likely to increase when the DA reaches 50%. This is frequently revised due to its link to inflation and education costs.
Medical/Fixed Medical Allowance (FMA)
The basis for increasing the medical allowance for pensioners was previously laid down in the 7th Pay Commission. The possibility of a revision of the FMA during the new pay commission process cannot be ruled out.
Other allowances
Perks like dress allowance, risk allowance, and skill-based pay are also expected to increase. Some performance-based elements may also be included.
Will the annual growth continue?
Krishnamurthy says the implementation of the 8th Pay Commission recommendations could take until 2027. If the deadline is extended, annual increases will continue under the current structure.
Will MACPS be affected?
The rules under the Modified Assured Career Progression Scheme (MACPS) will continue to apply. This means that salary structures will continue to be upgraded upon completion of 10, 20, and 30 years of service, but the rank will not be upgraded. A “very good” performance benchmark is required to receive MACP. If MACP is delayed for any reason, subsequent upgrades are also delayed proportionately.
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