Synopsis
8th Pay Commission fitment factor: Employee groups are advocating for the 8th Pay Commission to reconsider the current three percent annual increment rate, asserting it falls short given the skyrocketing living costs. They argue that adjusting the increment to a more robust seven percent can lead to nearly doubling the basic salaries over the next decade. The conclusive salary hike recommendations will be unveiled following the report's official announcement.
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The 8th Pay Commission, after its two-day stakeholders’ consultation meet in Jaipur, is now scheduled to visit Chennai on September 7 and 8. Employee and pensioner bodies and other stakeholders will meet the 8th CPC officials to discuss several issues. However, increasing the annual increment rate from 3% is an issue that almost all leading organisations have prominently raised in the previous meeting and is likely to be discussed again.
The current annual increment rate of 3% for central government employees, they believe, is insufficient to help them meet rising expenses. Organisations have recommended increasing the increment rate to up to 7%. If approved, how will a higher increment rate of 5% or 7% impact the salaries of central government employees?
Recommendations for higher increment rate
The National Council of the Joint Consultative Machinery (NC-JCM), which is the main central government employees’ body, has suggested a 6% annual increment rate in its memorandum submitted to the 8th Pay Commission.
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The All India Defence Employees’ Federation (AIDEF) and the Federation of National Postal Organisations (FNPO) have also recommended a 6% annual increment rate each. The All India New Pension Scheme Employees’ Federation (AINPSEF), on the other hand, wants a 7% annual increment rate.
8th CPC annual increment rate recommendations by employee bodies
Organisation Proposed Annual Increment National Council of the Joint Consultative Machinery (NC-JCM) 6% All India Defence Employees' Federation (AIDEF) 6% Federation of National Postal Organisations (FNPO) 6% All India New Pension Scheme Employees Federation (AINPSEF) 7% Indian Railways' Supervisors' Association (IRTSA) 5%
How 3% annual increment rate impacts salaries of central government employees
Let’s begin with a Level 1 employee whose starting basic pay as per the 7th Pay Commission is Rs 18,000. At a 3% increment rate, their basic pay would reach Rs 23,500 at the end of the 10th year of the pay commission.
Similarly, a Level 5 employee has a starting basic salary of Rs 29,200 as per the 7th Pay Commission. They would have got approximately Rs 38,100 at the end of the 10th year of the pay commission.
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Basic pay of Level 1-5 employees at 3% annual increment rate (As per 7th CPC)
Year Level 1 Level 2 Level 3 Level 4 Level 5 1 ₹ 18,000 ₹ 19,900 ₹ 21,700 ₹ 25,500 ₹ 29,200 2 ₹ 18,500 ₹ 20,500 ₹ 22,400 ₹ 26,300 ₹ 30,100 3 ₹ 19,100 ₹ 21,100 ₹ 23,100 ₹ 27,100 ₹ 31,000 4 ₹ 19,700 ₹ 21,700 ₹ 23,800 ₹ 27,900 ₹ 31,900 5 ₹ 20,300 ₹ 22,400 ₹ 24,500 ₹ 28,700 ₹ 32,900 6 ₹ 20,900 ₹ 23,100 ₹ 25,200 ₹ 29,600 ₹ 33,900 7 ₹ 21,500 ₹ 23,800 ₹ 26,000 ₹ 30,500 ₹ 34,900 8 ₹ 22,100 ₹ 24,500 ₹ 26,800 ₹ 31,400 ₹ 35,900 9 ₹ 22,800 ₹ 25,200 ₹ 27,600 ₹ 32,300 ₹ 37,000 10 ₹ 23,500 ₹ 26,000 ₹ 28,400 ₹ 33,300 ₹ 38,100
Source: 7th Pay Commission report
Other than basic salary, most employees get dearness allowance (DA), house rent allowance (HRA), and transport allowance (TPTA). However, employee associations believe that even after getting these allowances, employees at low levels struggle to meet expenses, especially if they are posted in Tier I cities. The AINSPEF says that a 7% annual increment rate can nearly double employees’ basic salary in a pay commission.
How employees’ basic pay may be impacted at 5%-7% annual increment rates
Let’s take the example of a Level 8 employee with a basic salary of Rs 47,600. Assuming that the 8th Pay Commission may approve a 2.15 fitment factor, we will compare how the employee’s basic salary will change in 10 years at annual increment rates of 3%, 5%, 6%, and 7%.
Salary calculation assumptions
Basic salary of Level 8 employee- Rs 47,600
Estimated revised salary in 8th CPC- Basic pay x 2.15 fitment factor
Annual increment (at 3%) of revised basic pay
Total salary in 10 years (at 3% increment)
Annual increment (at 5%-7%) of revised basic pay
Total salary in 10 years (at 5%-7% increment)
Extra salary in 10 years = (Total pay in 10 years at 5-7% annual increment) - (Total pay in 10 years at 3% annual increment)"
Salary benefit in 10 years at 3% vs 5% annual increment rate
Current basic - Level 1 ₹ 47,600 Revised basic @ x2.15 ₹ 1,02,340
Year Monthly Basic(with 3% Increment) Annual Salary (3%) Monthly Basic(with 5% Increment) Annual Salary (5%) 1 ₹ 1,02,340 ₹ 12,28,080 ₹ 1,02,340 ₹ 12,28,080 2 ₹ 1,05,410 ₹ 12,64,922 ₹ 1,07,457 ₹ 12,89,484 3 ₹ 1,08,573 ₹ 13,02,870 ₹ 1,12,830 ₹ 13,53,958 4 ₹ 1,11,830 ₹ 13,41,956 ₹ 1,18,471 ₹ 14,21,656 5 ₹ 1,15,185 ₹ 13,82,215 ₹ 1,24,395 ₹ 14,92,739 6 ₹ 1,18,640 ₹ 14,23,681 ₹ 1,30,615 ₹ 15,67,376 7 ₹ 1,22,199 ₹ 14,66,392 ₹ 1,37,145 ₹ 16,45,745 8 ₹ 1,25,865 ₹ 15,10,383 ₹ 1,44,003 ₹ 17,28,032 9 ₹ 1,29,641 ₹ 15,55,695 ₹ 1,51,203 ₹ 18,14,433 10 ₹ 1,33,530 ₹ 16,02,366 ₹ 1,58,763 ₹ 19,05,155 Total pay in 10 years ₹ 1,40,78,561 ₹ 1,54,46,658 Extra pay in 10 years ₹ 13,68,097
Salary benefit in 10 years at 3% vs 6% annual increment rate
Year Monthly Basic(with 3% Increment) Annual Salary (3%) Monthly Basic(with 6% Increment) Annual Salary (6%) 1 ₹ 1,02,340 ₹ 12,28,080 ₹ 1,02,340 ₹ 12,28,080 2 ₹ 1,05,410 ₹ 12,64,922 ₹ 1,08,480 ₹ 13,01,765 3 ₹ 1,08,573 ₹ 13,02,870 ₹ 1,14,989 ₹ 13,79,871 4 ₹ 1,11,830 ₹ 13,41,956 ₹ 1,21,889 ₹ 14,62,663 5 ₹ 1,15,185 ₹ 13,82,215 ₹ 1,29,202 ₹ 15,50,423 6 ₹ 1,18,640 ₹ 14,23,681 ₹ 1,36,954 ₹ 16,43,448 7 ₹ 1,22,199 ₹ 14,66,392 ₹ 1,45,171 ₹ 17,42,055 8 ₹ 1,25,865 ₹ 15,10,383 ₹ 1,53,882 ₹ 18,46,578 9 ₹ 1,29,641 ₹ 15,55,695 ₹ 1,63,114 ₹ 19,57,373 10 ₹ 1,33,530 ₹ 16,02,366 ₹ 1,72,901 ₹ 20,74,815 Total pay in 10 years ₹ 1,40,78,561 ₹ 1,61,87,071 Extra pay in 10 years ₹ 21,08,510
Salary benefit in 10 years at 3% vs 7% annual increment rate
Year Monthly Basic(with 3% Increment) Annual Salary (3%) Monthly Basic(with 7% Increment) Annual Salary (7%) 1 ₹ 1,02,340 ₹ 12,28,080 ₹ 1,02,340 ₹ 12,28,080 2 ₹ 1,05,410 ₹ 12,64,922 ₹ 1,09,504 ₹ 13,14,046 3 ₹ 1,08,573 ₹ 13,02,870 ₹ 1,17,169 ₹ 14,06,029 4 ₹ 1,11,830 ₹ 13,41,956 ₹ 1,25,371 ₹ 15,04,451 5 ₹ 1,15,185 ₹ 13,82,215 ₹ 1,34,147 ₹ 16,09,762 6 ₹ 1,18,640 ₹ 14,23,681 ₹ 1,43,537 ₹ 17,22,446 7 ₹ 1,22,199 ₹ 14,66,392 ₹ 1,53,585 ₹ 18,43,017 8 ₹ 1,25,865 ₹ 15,10,383 ₹ 1,64,336 ₹ 19,72,028 9 ₹ 1,29,641 ₹ 15,55,695 ₹ 1,75,839 ₹ 21,10,070 10 ₹ 1,33,530 ₹ 16,02,366 ₹ 1,88,148 ₹ 22,57,775 Total pay in 10 years ₹ 1,40,78,561 ₹ 1,69,67,703 Extra pay in 10 years ₹ 28,89,143
10-year salary increase percentage estimates (3% vs 5-7%)
Annual increment rate Estimated salary increase in 10 years Increase vs 3% increment rate 3% — — 5% ₹13.68 lakh 9.72% more 6% ₹21.08 lakh 14.98% more 7% ₹28.89 lakh 20.52% more
You can see how a 1% annual increment rate hike can make a big difference in the basic salaries of central government employees. However, these are just estimates, and the real increment rate and salary hike will be known only after the government notifies the 8th Pay Commission report.
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