8th Pay Commission: Higher fitment factor vs higher annual increment rate— which can give bigger salary hike to employees?

What matters more for central government employees under the 8th Pay Commission over 10 years: a higher fitment factor at the time of pay revision or a higher annual increment every year?

Under the 7th Pay Commission, employees get a fitment factor of 2.57 and an annual increment of 3%. For the 8th Pay Commission, employee associations are demanding a fitment factor of up to 4.38 and an increase in the annual increment rate up to 7%. But how would different combinations of fitment factors and increment rates impact salaries over 10 years?

The fitment factor determines how the existing basic pay is multiplied to arrive at the revised basic pay under a new pay commission. Under the 7th Pay Commission, the factor was fixed at 2.57. For the 8th Pay Commission, many employee and pensioner organisations, including the National Council of the Joint Consultative Machinery (NC-JCM), have recommended a factor of 3.833. If accepted, it would increase the minimum basic salary of Rs 18,000 under the 7th Pay Commission to Rs 69,000 in the 8th Pay Commission.

Recommendations to the 8th Pay Commission about the fitment factor also vary. Several bodies, such as the NC-JCM, the All India Defence Employees’ Federation (AIDEF) and the Federation of National Postal Organisations (FNPO), are demanding a 6% annual increment rate. However, some organisations, such as the All India New Pension Scheme Employees Federation (AINPSEF), have recommended a 7% increment rate.

The basic argument of employee associations for recommending a high increment rate is that it will reduce the dependency on the 10-yearly basic salary revision through a pay commission. The AINPSEF claims that with a 7% increment rate, the gross salary of a central government employee will double in 7-8 years.

A Level 5 central government employee currently gets a basic salary of Rs 29,200 under the 7th Pay Commission. In our estimates for the revised pay under the 8th Pay Commission, we will how the combinations of a high fitment factor and a low increment rate, a low fitment factor and a high increment rate, and a high fitment factor and a high increment rate can impact the basic pay of a Level 5 employee in 10 years under the 8th Pay Commission.

If the 8th Pay Commission retains a fitment factor of 2.57 and the annual increment remains at 3%, the basic salary of a Level 5 employee could increase to Rs 75,044 in the first year, Rs 84,463 in the fifth year and Rs 97,915 in the 10th year.

However, if the fitment factor is 2.1 but the annual increment rate rises to 7%, the basic salary could be Rs 61,320 in the first year, may reach Rs 80,378 in the fifth year and may increase to Rs 1,12,734 in the 10th year.

In the third scenario, with a fitment factor of 2.57 and a higher annual increment of 7%, the basic salary could rise to Rs 75,044 in the first year, Rs 98,367 in the fifth year and to Rs 1,37,965 in the 10th year.