In a key development for government employees and retirees, the Union Cabinet, led by Narendra Modi, has approved the Terms of Reference (ToR) for the 8th Central Pay Commission.  The temporary commission will consist of a chairperson, one part-time member and a member-secretary, and is tasked with submitting its recommendations within 18 months. 

Key issues the panel will examine include pay structures, allowances, pension reforms, and the fiscal impact on states and public-sector units. The move affects approximately 50 lakh central government employees and around 69 lakh pensioners. With the previous pay commission implemented in 2016, the timing of this ToR signifies a proactive step ahead of expected implementation from January 1, 2026.  The government emphasises the need for fiscal prudence while aiming to boost employee welfare and the labour market’s alignment with current norms.