8th Pay Commission May Bring Only 13% Salary Hike: Kotak Report Dampens Hopes of Govt Employees

 

Over 33 lakh central government employees and 66 lakh pensioners who have been eagerly awaiting the implementation of the 8th Pay Commission may face disappointment. A recent report by Kotak Institutional Equities has estimated that the expected fitment factor—crucial for determining the basic pay revision—could be as low as 1.8, resulting in only a 13% real hike in salaries and pensions. This is notably lower than the 2.57 fitment factor recommended by the 7th Pay Commission, which led to a 14.3% increase in basic pay effective from 2016.

The fitment factor, applied solely to an employee’s basic pay, determines the magnitude of revision in salary structures. If this multiplier is low, the financial benefit remains minimal. For example, under the 7th Pay Commission, the minimum basic pay rose from ₹7,000 to ₹18,000. A similar leap is unlikely this time, as Kotak's report pegs the new minimum basic pay at ₹30,000.

Kunal Sharma, Founder of Taraksh Lawyers & Consultants, warns that reducing the fitment factor could lead to legal scrutiny. He cites the principle of non-retrogression in administrative law, suggesting any rollbacks in benefits may be deemed unfair and regressive. Employee unions have already voiced opposition, arguing that a minimal hike amidst rising inflation would be demoralizing.

While the 8th CPC was announced in January 2025, no chairman has been appointed yet, and its terms of reference remain undefined. Despite the delay, recommendations will be effective from January 2026, and longer delays could lead to larger arrear payouts. For now, hope for a substantial salary hike seems dim.