8th CENTRAL PAY COMMISSION (CPC), 2025
Background and Composition
The Central Government has constituted the 8th Central Pay Commission (CPC).
Chairperson: Retired Justice Ranjana Prakash Desai.
Members:
Professor Pulak Ghosh (IIM Bangalore) – Part-time member.
Pankaj Jain, IAS – Member-Secretary.
Timeframe: The commission will submit its report within 18 months.
What is a Pay Commission?
Pay Commissions are advisory bodies constituted by the Union Government (by executive order following a Cabinet decision).
The first CPC was established in 1946.
Purpose: To review and recommend changes in the salary structure, retirement benefits, and service conditions of Central Government employees, including defence personnel.
Recommendations are generally adopted (fully or partly) by State Governments too.
Terms of Reference (ToR) of the 8th CPC
The ToR specifies what the Commission must consider before making recommendations:
Economic conditions of the country and need for fiscal prudence.
Need to ensure adequate funds for welfare and development.
Unfunded cost of non-contributory pension schemes.
Impact on State finances, since many States follow CPC recommendations.
Comparison with pay structures in Central PSUs and private sector.
Financial Context
The Central Government’s pension bill (2025–26) is projected at ₹2.76 lakh crore, out of a total revenue expenditure of ₹39.44 lakh crore.
The burden of non-contributory pensions is a significant fiscal concern.
Hence, the Commission must balance employee welfare and fiscal sustainability.
International Practices
1940s–1970s: Public sector pay focused on equity and benchmarking with private jobs.
1980s: Efficiency became central to pay structures.
1990s onwards: Performance and incentive-based compensation gained importance.
Current trend: Focus on competence, skill retention, and cost control.
Global principles of fair compensation:
Clear pay philosophy.
Ability to attract & retain talent.
Internal equity (within public system).
External competitiveness (with private sector).
Transparency and clarity.
India: Internal equity exists, but external competitiveness lags, especially for top-level and specialist roles.
Key Observations from Past CPCs
Compression ratio (7th CPC): 1:12.5 — ratio of lowest to highest salaries.
Entry-level public salaries are often higher than private counterparts,
while top/specialist posts are lower than private sector equivalents.Privileges, perks, and job security make up for the gap.
Future focus: Review higher-level pay to attract specialist talent.
Gaps and Expectations
TOR does not currently include aspects like:
Learning and development opportunities.
Training and work environment.
Health promotion and flexible work conditions.
It is expected that the 8th CPC may address these in its report.
Challenges
Balancing fiscal discipline with employee welfare.
Managing the growing pension liability under non-contributory schemes.
Ensuring competitiveness with private sector pay for skilled professionals.
Need for broad-based expertise—economic, HR, and finance perspectives.
Significance
CPC decisions impact over 50 lakh Central Government employees and 70 lakh pensioners.
The States often mirror the pay revisions, multiplying the fiscal implications.
The 8th CPC’s recommendations will shape public pay policy till the 2030s.
Prelims Practice MCQs
Q. Consider the following statements:
The First Central Pay Commission was constituted in 1950.
The compression ratio between lowest and highest government salaries in the 7th CPC was 1:12.5.
The 8th CPC will review the salary structure of both Central and State government employees.
Which of the above is/are correct?
A. 1 and 2 only
B. 2 only
C. 1 and 3 only
D. 2 and 3 only
Answer: B. 2 only
Explanation:
The First CPC was set up in 1946, not 1950.
The compression ratio was 1:12.5 in the 7th CPC.
The CPC reviews only Central Government employees; States often adopt recommendations separately.
Q. Which of the following is a key fiscal concern highlighted for the 8th CPC?
A. Rising subsidy burden.
B. Large pension liabilities under non-contributory schemes.
C. Increase in defence imports.
D. High current account deficit.
Answer: B.
Explanation:
The pension bill (₹2.76 lakh crore in 2025–26) under non-contributory schemes is a major fiscal challenge the CPC must consider.
Q. Which of the following best explains the Compression Ratio mentioned in the 7th CPC?
A. Ratio of pension to salary.
B. Ratio of entry-level to top-level salary.
C. Ratio of pay increase between successive CPCs.
D. Ratio of total government expenditure to salary bill.
Answer: B.
Explanation:
The compression ratio is the ratio between the lowest and highest government salaries.
In the 7th CPC, it was fixed at 1:12.5.