New Delhi: The Union Budget 2026, presented on February 1, brought no announcement on salary hikes under the 8th Pay Commission, disappointing many central government employees who were hoping for clarity on pay revisions. However, officials said this was expected, as the government usually waits for the Pay Commission to complete its work before making any financial commitments.

While no major pay hike was announced, employees and pensioners will get some relief as Dearness Allowance (DA) and Dearness Relief (DR) are set to increase by 2% each, based on Labour Bureau inflation data for December.

8th Pay Commission team in place, benefits likely from FY2028

The Union Cabinet has already approved the Terms of Reference (ToR) for the 8th Central Pay Commission, paving the way for a comprehensive review of pay, allowances and pension structures for central government staff and retirees. The panel is expected to benefit nearly 50 lakh employees and 69 lakh pensioners across the country.

The commission will be chaired by former Supreme Court judge Ranjana Prakash Desai, and will include a part-time member and a member-secretary. It is expected to submit its recommendations within 18 months of its constitution and will also present an interim report during its proceedings.

According to rating agency ICRA, the actual financial impact of the 8th Pay Commission is likely to be felt from FY2028, when salary outgo could rise sharply. If recommendations are implemented retrospectively from January 1, 2026, the Centre may have to pay arrears for nearly 15 months, potentially pushing salary expenditure up by 40–50% in FY2028.

For now, the government’s focus remains on boosting capital expenditure, particularly in infrastructure, while employees await the Pay Commission’s final recommendations.