8th Pay Commission: 7% annual increment vs high fitment factor? Which may give more salary to centra

Some employee groups like the All India New Pension Scheme Employees’ Federation (AINPSEF), are pushing for a 7% annual increment from the 8th Pay Commission for the central government workers. Meanwhile, others like the National Council of the Joint Consultative Machinery (NC-JCM), the All India Defence Employees' Federation (AIDEF) and the Federation of National Postal Organisations (FNPO) have all recommended a 6% annual increment.

They believe that a higher increment rate would reduce the reliance on a high fitment factor in pay commissions and employees won’t have to wait for 10 years for a decent salary bump.

They point out that the annual increment under the 7th Pay Commission is just 3%, which doesn’t really benefit low-level employees much every year. A higher annual increment would fix this issue, as AINSPEF claims that employees’ basic pay will double within 10 years.

But will a high annual increment rate be enough, or do employees still need a push from a fitment factor

Ramachandran Krishnamoorthy, associate partner, managed services, BDO India, says a one-time revision (fitment factor) front-loads a huge jump immediately, and even a much higher ongoing annual increment takes many years to catch up on cumulative earnings, if it ever does at plausible rates.

Krishnamoorthy presents the case of a Level 10 employee (basic pay Rs 56,100) and compares two paths: a one-time fitment revision (like the 2.57x scenario) followed by normal 3% annual increments, versus staying on the old scale but with a permanently higher annual increment rate.

His projections show it may take decades before a higher increment rate overtakes the salaries supplemented with a high fitment factor and a 3% annual increment rate.

Key takeaways according to Krishnamoorthy

• A one-time revision wins decisively in the short-to-medium term (first 10–20 years of a career), because it resets the base immediately — you don't have to wait for compounding to build up.

• A much higher increment (10%+, vs the current 3%) can eventually overtake a one-time revision in cumulative terms, but only after roughly 20–25 years, and only if that elevated rate is sustained the whole time — which historically doesn't happen (increments have hovered around 3% since the 6th CPC).

• In practice, the two aren't really substitutes: pay commissions bundle both — a one-time fitment jump plus the normal annual increment continuing on top of the new higher base.

According to projections, a high increment rate can help employees’ salaries keep pace with rising expenses, but it works best when combined with a fitment factor.

Source: Economic Times