8th Pay Commission: Salary will increase, but DA will be zero? Learn about the impact on employees...

There's good news for millions of central government employees and pensioners. The central government recently approved the Terms of Reference (ToR) for the 8th Pay Commission. This means that the salary and pension structure of government employees could see significant changes in the coming months.

This commission will be headed by Justice (Retired) Ranjana Desai. The Pay Commission will submit its recommendations to the government in the next few months. Before this, the commission will consult with employees, pensioners, and other stakeholders and seek their input.

Fitment Factor to Determine Salary Increase
Like every Pay Commission, this time too, the fitment factor will play a key role in determining salaries. Simply put, the fitment factor is the number by which the old basic salary is multiplied to determine the new basic salary. According to a report by brokerage houses Kotak Institutional Equities and Ambit Capital, the fitment factor this time could be between 1.8 and 2.46.

Kotak estimates that if the 1.8 factor is implemented, the basic salary of Level-1 employees (such as peons or attendants) could increase from ₹18,000 to ₹32,400. While this 80% increase seems substantial, the actual increase will be less because the dearness allowance (DA) will be reduced to zero upon implementation of the new salary.

Will DA reset to zero?

Currently, Level-1 employees receive a total of approximately ₹29,000, including 58% DA and house rent allowance (HRA). When DA is reset to zero, their basic salary will increase, meaning DA will no longer be paid separately but will become part of their salary. This will not reduce the employees' net salary, but will strengthen the pay structure. The new basic salary increase will also determine factors like HRA, transport allowance, and future pension.

Pensioners will also benefit.
The Pay Commission's recommendations will not be limited to salaried employees. Pensioners' pensions will also be recalculated based on the new basic pay. This means that when the basic pay increases, the pension amount will also increase proportionately.

What will change for employees?
Reducing DA to zero does not mean that employees' earnings will decrease. The only difference will be that the amount previously received as DA will now be included in the basic pay. This will not only strengthen the monthly salary structure but will also increase future increments and pensions.

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