The Union Cabinet, chaired by Prime Minister Narendra Modi, on October 28 approved the Terms of Reference (ToR) for the 8th Central Pay Commission, according to an official release.
Earlier in January 2025, Union Minister Ashwini Vaishnaw had announced that the Centre had cleared the formation of the 8th Pay Commission, which would review and revise the pay, pensions, and allowances of central government employees and pensioners in line with inflation.
However, the commission could not officially begin its work until the Terms of Reference were finalised. 
The ToR outlines the scope, functions, and framework within which the Pay Commission will operate and make its recommendations.
8th Pay Commission: Key Terms of Service
The 8th Pay Commission will be a temporary body.
It will comprise one Chairperson, one Part-Time Member, and one Member-Secretary.
The panel must submit its final recommendations within 18 months of its constitution.
It may submit interim reports on specific matters as and when recommendations are finalised.
Focus Areas for the Commission
While making its recommendations, the Commission will take into account the following:
The country&rsquo;s current economic conditions and the need for fiscal discipline;
The necessity of ensuring adequate funds for welfare and developmental initiatives;
The unfunded costs linked to non-contributory pension schemes;
The financial implications for State Governments, which often implement modified versions of central recommendations; and
The existing pay structure, benefits, and working conditions of employees in Central Public Sector Undertakings and the private sector.
About the 8th Pay Commission
The Government had announced the 8th Central Pay Commission in January 2025 to review and suggest changes to the salary structure and service conditions of central government employees. 
The recommendations are expected to come into effect from January 1, 2026.
Central Pay Commissions are typically constituted every decade to review pay scales, retirement benefits, and related service conditions of central employees and propose necessary adjustments.
Salary Composition of Central Government Employees
The salary structure of central government employees includes basic pay, dearness allowance (DA), house rent allowance (HRA), and transport allowance. 
According to a report by Ambit Institutional Equities:
Basic pay makes up about 51.5% of the total income,
DA accounts for around 30.9%, HRA contributes approximately 15.4%, and
Transport allowance represents nearly 2.2%.
The 8th Pay Commission&rsquo;s recommendations are expected to benefit over one crore central government employees and retirees, including about 50 lakh active employees and 65 lakh pensioners, both civilian and defence personnel.

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October 28, 2025 | 17:17 IST