In a significant move for India’s workforce, the Union Cabinet chaired by Narendra Modi on 28 October 2025 approved the Terms of Reference (ToR) for the 8th Central Pay Commission (8th CPC). The decision formally sets in motion the decade-long cycle of pay review for central government employees and pensioners, affecting an estimated 50 lakh employees and some 65 lakh pensioners.
Key points from the ToR indicate that the commission will comprise one Chairperson, a part-time member and a Member-Secretary. The commission will submit its recommendations within 18 months of its formation. The government therefore aims to implement the new pay structure from 1 January 2026, after granting final approval.
Its scope will cover salary structure, allowances, pensions, working conditions, and will factor in fiscal prudence, the impact on state finances, and benchmark comparisons with public-sector and private-sector pay practices.
For employees and pensioners, the road ahead could lead to meaningful revisions in their remuneration. Analysts estimate that a fitment factor around 1.8 may translate into an effective basic pay increase of roughly 13 per cent, with broader implications for allowances and other benefits. Meanwhile, economic experts and government watchers warn that the review must strike a balance between improving employee pay and maintaining budgetary discipline, so that long-term fiscal health remains intact.
With the ToR approved, attention now turns to the appointment of commission members and the submission of an interim or full report. The recommendations are expected to shape compensation structures in the central government for the coming decade — and could ripple across state governments, PSUs and benchmark private-sector roles.
