There will be no big bang as expected in the 8th Pay Commission? Government can find a middle path

The 8th Pay Commission is currently the biggest and most talked about topic for about 1.1 crore central employees and pensioners across the country. Everyone’s eyes are fixed on how much their basic salary will increase this time and to what extent the government will accept their demands. However, from inside indications, it is clear that the government is considering adopting a middle path (balanced path) instead of making a huge ‘salary explosion’. This means that the salary of the employees will definitely increase, but perhaps not as much as is being expected. Let us understand what is the complete mathematics behind this and what are the main demands of the employees. What is fitment factor and why is there controversy over it? The most important word in the recommendations of the Pay Commission is ‘Fitment Factor’. This is the mathematical formula on the basis of which the new basic salary of the employees is decided by revising the old basic salary of the employees. Mathematics of 7th Pay Commission: In the last Pay Commission, the government had approved 2.57 fitment factor. With its implementation, the minimum basic salary of employees increased directly from ₹ 7,000 to ₹ 18,000. Demand for 8th Pay Commission: This time the central employee organizations and unions demand that the fitment factor should be increased to 3.83. If the government accepts this demand exactly, then a huge increase of about 283% can be seen in the minimum salary. Why won’t the government take a big decision? (Financial Mathematics) Experts and some big union leaders believe that the government may avoid completely accepting the demand of 3.83 fitment factor. The main reason behind this is the economic balance of the country and the increasing financial burden on the government exchequer: Additional burden of lakhs of crores: The government not only has to increase the salary of the current employees, but along with it there is also a huge increase in the dearness allowance (DA), other allowances and pension of pensioners. Impact on the states: After the decision of the Central Government, all the state governments of the country also implement Salary Revision in their respective states. In such a situation, implementing a huge fitment factor will put immense pressure on the exchequer of the entire country. Rising inflation versus economic balance The logic of the employee organizations is very clear—in the last few years, the expenses on everyday things, children’s education, health and household expenses have increased exponentially. Due to rising inflation, the existing salary structure is proving inadequate to meet the needs of the employees. On the other hand, the government wants to keep the country’s growth rate and fiscal deficit under control. This is the reason why now a ‘moderate’ i.e. balanced pay revision is being expected. This means that the government can increase the fitment factor from 2.57 to 3.00 or thereabouts, which will provide relief to the employees and also not put an unbearable burden on the exchequer.