Eighth Pay Commission: Terms of Reference, Timeline

30th Oct 2025

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In News- The Union Cabinet on October 28, 2025, approved the Terms of Reference (ToR) of the Eighth Central Pay Commission (8th CPC).

About the Pay Commission System

Origin: The first Pay Commission was set up in 1947. Since then, seven commissions have been established approximately every decade.
Objective: To revise the pay structure, allowances, and pensions of Central Government employees, considering inflation, fiscal constraints, and market parity.
Coverage: Around 50 lakh employees and 69 lakh pensioners are expected to benefit from the 8th CPC's recommendations.

Chairperson: Justice Ranjana Prakash Desai, former Supreme Court judge and current Chairperson of the Press Council of India.
Members:
- Prof. Pulak Ghosh (IIM Bangalore) - Part-time Member
- Pankaj Jain, Petroleum Secretary - Member-Secretary
Timeline: Recommendations to be submitted within 18 months of constitution.

The Commission will:

Review existing pay structures, allowances, and pensions of Central Government employees.
Maintain a balance between employee welfare and fiscal prudence, keeping in view the overall economic conditions.
Examine implications for state finances, since many states follow similar structures.
Compare with public sector undertakings and private sector compensation trends.
New addition: Consider the unfunded cost of non-contributory pension schemes — an important clause given the ongoing Old Pension Scheme (OPS) versus National Pension System (NPS) debate.

OPS vs NPS Context

Old Pension Scheme (OPS):

Applies to employees who joined before January 1, 2004.
Provides a defined benefit pension, i.e., 50% of the last drawn salary, entirely funded by the government.

National Pension System (NPS):

Applicable to employees who joined after January 1, 2004.
Defined contribution scheme — both employee and government contribute; final pension depends on market returns.

Unified Pension Scheme (UPS):

Introduced in 2024, it ensures a minimum assured pension and family pension while retaining contribution-based features.
Example: Minimum assured payout of ₹10,000 after 10 years of service and full pension after 25 years.

Recommendations to be released by April 2027.
Effective date: January 1, 2026 (retrospective).
Likely arrears will be paid once the report is implemented, while allowances may be revised prospectively.

Source- IE

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