8th Pay Commission: Govt rules out DA–basic pay merger despite employee expectations

The central government has formally set the 8th Central Pay Commission (CPC) in motion, bringing relief to employees and pensioners waiting for clarity on the next round of pay revision. But even as the process begins, the Centre has made it clear that the dearness allowance (DA) and dearness relief (DR) will not be merged with basic pay — a setback for many who hoped for immediate relief from inflation.

What has the government announced?

The Union finance ministry has confirmed that the 8th CPC was constituted through a notification issued on November 3. A written response in Parliament also underlined that the Centre is not considering any plan to merge DA or DR with basic pay.

DA and DR, which help employees and pensioners manage rising prices, currently stand at 55% according to one response and 58% according to another, after recent hikes ahead of Diwali. These rates are revised every six months based on the All India Consumer Price Index for Industrial Workers.

The clarification ends weeks of speculation that the new Commission might explore a one-time merger of DA with basic pay — a move that would have increased the salary base and boosted other linked benefits.

Why are employees disappointed?

Employee federations have long argued that the six-month gap in DA revisions does not match real-time inflation. With living costs rising faster than expected, many hoped that merging DA with basic pay would offer more immediate protection against the erosion of income.

However, the Centre’s latest stand indicates that the current structure of periodic adjustments will continue. This has disappointed employees and pensioners who were expecting interim relief ahead of the Commission’s final recommendations.

What is the 8th Pay Commission expected to do?

The Commission, headed by Justice (Retd.) Ranjana Desai, has a wide mandate. It will examine pay structures, allowances, pensions, and service conditions for central government staff, defence forces, All India Services officers, and judiciary employees in Union Territories.

Its terms of reference, approved by the Union Cabinet in October, require it to study economic conditions, government resources, and fiscal discipline while framing its proposals. The Commission will submit its report within 18 months, and may release interim suggestions during the process.

It will have a chairperson, one part-time member, and a member-secretary.

Why are there concerns about delays?

Although the 8th CPC was first announced in January 2025, formal appointments and the terms of reference were finalised only in October. This delay has already led many to question whether the final recommendations can be implemented by 2026, in line with the usual 10-year revision cycle.

Some employee unions have also raised concerns about the absence of a clear implementation timeline and what they view as gaps in the coverage of pensioners.

What does this mean for employees and pensioners now?

For now, the existing DA/DR system will continue with biannual revisions based on price movements. While many had hoped for a DA–basic pay merger to ease the impact of inflation, the government’s position remains unchanged.

The 8th CPC’s recommendations, once finalised, will shape salaries and pensions for over 11 million central government employees and pensioners. Until then, expectations remain high — but relief may still be some distance away.