PM Modi Cabinet approves 8th Pay Commission Terms of Reference

In a significant development for central government employees, the Union Cabinet, led by Prime Minister Narendra Modi, on Tuesday approved the Terms of Reference (ToR) for the 8th Central Pay Commission (CPC). The recommendations of the commission are expected to influence the salaries of nearly 50 lakh serving central government employees and 69 lakh pensioners.

The government had earlier, in January 2025, announced the formation of the 8th CPC to review and revise the pay structure, allowances and pension benefits of Central Government staff and retired personnel. With the approval of the Terms of Reference, the commission can now formally begin its work.

8th Pay Commission: Key Highlights from the Union Cabinet’s Decision

According to the Cabinet statement, the 8th Central Pay Commission (CPC) will operate as a temporary body comprising a Chairperson, one Part-Time Member and one Member-Secretary. The commission has been mandated to submit its final recommendations within 18 months of its constitution, with the option to present interim reports as specific recommendations are completed.

The commission is chaired by former Supreme Court judge Justice Ranjana Prakash Desai, who will submit a preliminary report to the government. Professor Pulak Ghosh of IIM Bangalore has been appointed as the Part-Time Member, while Petroleum Secretary Pankaj Jain will serve as the Member-Secretary.

When asked about when the recommendations of the 8th Central Pay Commission would be implemented, Information and Broadcasting Minister Ashwini Vaishnaw said, “The specific date will be decided once the interim report comes in, but most likely it should be January 1, 2026.”

The commission will frame its recommendations after examining the following key factors:

• The country’s economic situation and the need to maintain fiscal discipline

• Ensuring sufficient funds for development projects and welfare programmes

• The unfunded financial burden of non-contributory pension schemes

• The impact on state government finances, as most states adopt CPC recommendations with modifications

• The current pay structure, allowances and working conditions of employees in Central Public Sector Undertakings (CPSUs) and the private sector. 

The Terms of Reference (ToR) serves as the guiding framework for any Pay Commission, outlining the rules, scope and parameters within which it prepares its recommendations. It defines key terms, conditions and areas of examination that shape the commission’s work.

The ToR is drafted by the Joint Consultative Machinery (JCM), which includes union representatives from various central government departments. From its 60 members, 12 are selected to form a standing committee that discusses the ToR with secretary-level officials. Once finalised, the draft is forwarded to the Cabinet Committee under the Finance Ministry for approval.

The ToR is crucial as it acts as the primary reference document for the Pay Commission while formulating its recommendations.

According to a Times of India report, the government has not made the ToR for the 8th Pay Commission public. However, one of the commission’s key responsibilities will be to examine the financial implications of non-contributory pension schemes. The Centre’s decision to shift employees recruited before 2004 from the National Pension System (NPS) to the Unified Pension Scheme (UPS) has raised concerns, as there is no clarity on future pension liabilities. With no estimates provided, no budgetary allocation has yet been made to meet these obligations. Additionally, any upward revision in salaries and allowances will further increase pension commitments.

Central Pay Commissions are constituted every ten years to review salary structures, pension rules and service conditions of central government employees. Following this cycle, the 8th Central Pay Commission’s recommendations are expected to be implemented from January 1, 2026. The 7th Pay Commission was set up in February 2014, and its recommendations came into effect on January 1, 2016.

Central government employees also receive Dearness Allowance (DA) to counter the impact of inflation on their income. The DA is revised twice a year based on inflation trends, forming a significant component of the overall pay package.

Also Read: Union Cabinet Approves 8th Pay Commission for Central Govt Employees