8th Pay Commission: Why a 2.0 fitment factor may not double gross salary

As the 8th Pay Commission is working on its report of recommendations for central government employees and pensioners, a key debate is centred around the fitment factor. It’s the multiplier that helps increase the basic pay of an employee. For example, the basic pay of an employee earning Rs 35,400 will double if the 8th Pay Commission decides on a 2.0 fitment factor.

But other than basic salary, most central government employees get at least three components- dearness allowance (DA), house rent allowance (HRA) and transport allowance (TPTA), which form their gross salary.

But many employees have been thinking that if the basic pay can double at a 2.0 fitment factor, can their gross salary rise by two times? Find out why it may not even under a high fitment factor!

Before we explain why gross pay may not rose by 100% at a 2.0 fitment factor, have a look at the gross pay rise in the previous two pay commissions. The 6th Pay Commission set a fitment factor of 1.86, but the average hike in gross salary was 54%. The 7th Pay Commission went with a much higher fitment factor of 2.57. However, the gross salary hike was just 14.29%.

Such an anomaly was found mainly because of the DA rate at the end of a pay commission. An increase in other allowances also determines the gross pay.

For instance, the DA at the end of the 6th Pay Commission was 125%, so when its adjustment to form the basic pay for the 7th Pay Commission was done, the fitment factor was already 2.25 (100% for basic pay+125% for DA). What it means is that the employee was already getting their gross salary at a 2.25 fitment factor in the 6th Pay Commission. So, when the 7th Pay Commission fixed a 2.57 fitment factor, the average gross salary jumped by just 14.29%.

Now take the example of the 6th Pay Commission. It adjusted the 47% DA of the 5th Pay Commission. It means employees were already getting a 1.47 fitment factor. So, even at a 1.86 fitment factor, employees got a 54% hike in their gross salary.

While it may depend on the fitment factor, which is yet to be decided, in an illustration from Bankbazaar, ET Wealth Online will show how the gross pay of Level 3-6 central government employees may rise by just 31%, 55% and 68% at fitment factors of 2.0, 2.38 and 2.57, respectively.

In the illustration, an employee’s current gross pay will be calculated based on the current DA rate of 60% and a 30% HRA rate for employees residing in X-category cities.

For the revised gross salary estimates in the 8th Pay Commission, the HRA rate assumption will be 24%, as the original HRA for X category cities was 24% in the 7th Pay Commission. When DA reached 50% in January 2024, the rate was increased to 30%.