The Modi government has paved the way for the establishment of the 8th Pay Commission, which will impact the salaries and pensions of central employees. Union Minister Ashwini Vaishnaw announced the commission's formation on January 16, ahead of the 2025 budget, with the new recommendations set to take effect from January 1, 2026. Currently, salaries and pensions are based on the 7th Pay Commission, which was implemented in 2016. Following the announcement, central employees are particularly focused on the Unified Pension Scheme (UPS).
The 8th Pay Commission is expected to introduce major changes to pensions under the National Pension System (NPS) and the UPS. The UPS, set to begin on April 1, 2025, will combine the benefits of both the old pension scheme (OPS) and NPS. Central employees will be entitled to benefits such as family pension, a fixed pension amount, and a minimum pension.
What is the Fitment Factor?The fitment factor is a key element in calculating enhanced wages and pensions for employees. It considers factors like inflation, employee needs, and the government's financial capacity. According to reports, the fitment factor may rise from 2.57 to 2.86, potentially resulting in an increase in both wages and pensions.
What is UPS and How Will It Be Implemented?The UPS is a retirement plan designed to combine the best features of the OPS and the NPS. It aims to provide secure benefits to government employees post-retirement, including provisions like family pension, a fixed pension amount, and a minimum pension for all central employees. UPS is set to take effect from April 1, 2025. Under this scheme, the minimum pension will be Rs 10,000 per month for employees who have completed at least 10 years of service at the time of retirement. Upon the pensioner's death, the family will receive 60% of the pension amount.
With the introduction of the fitment factor of 2.86, central employees' minimum basic wage could rise from Rs 18,000 to Rs 51,480, marking a major increase. Pensions are also expected to rise considerably, from the current Rs 9,000 to a range of Rs 17,280 to Rs 25,740, depending on the final fitment factor.