8th Pay Commission: How does the government panel decide fitment factor? Know salary hike formula here

The centre approved the terms of reference of the 8th Central Pay Commission on October 29. The formation of the 8th Pay Commission was announced in January 2025.

What is ToR?

Terms of reference (ToR) are a document that defines the purpose, scope, and structure of a project, committee, or other formal undertaking.

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The effect of the 8th Central Pay Commission recommendations would normally be expected from January 1, 2026.

Meanwhile, let's know how the government panel decides the fitment factor.

What is a fitment factor?

Fitment Factor is the number by which the old basic pay is multiplied to get the new basic pay.

Formula: New basic pay= old basic pay*fitment factor

How the fitment factor is decided?

Here are the major steps that have been taken by the government to decide the fitment factor.

1. Data Collection: Data on inflation (CPI/AICPI Index), DA percentage, and salary increase since the last pay revision are collected.
2. Target Minimum Pay: This measures whether the minimum wage is sufficient to cover the expenses of a common family.
3. Fitment Calculation: Fitment Factor = (Target Minimum Pay) ÷ (Current Minimum Pay)

Besides the above factors, there are a few other steps that are also taken before deciding on a fitment factor. These include:

Economic conditions: The government also assesses inflation rates, cost-of-living changes, and the overall economic environment. This is to ensure salaries keep pace with the current economy.

Private sector salaries: The government also ensures that the salaries are competitive and attractive compared to the private sector, which helps in retaining talent.

Fiscal capacity: After a pay commission is implemented, the economy should not be impacted by any way. Therefore, the government must consider its own budget and ability to pay for salary increases.