Last Updated:October 30, 2025, 13:47 IST

The Terms of Reference (ToR) guide the Commission’s work, defining its scope and objectives. It specifies what will be reviewed, including salary structure, allowances and pensions

In a significant development for government employees and pensioners, the central government has approved the Terms of Reference (ToR) for the 8th Pay Commission. On October 28, 2025, the central cabinet, led by Prime Minister Narendra Modi, gave the green light to the ToR.

Union Minister Ashwini Vaishnav revealed that before finalising the ToR, extensive consultations were held with various ministries, state governments, and employee associations. The Commission is tasked with submitting its recommendations within 18 months, paving the way for potential increases in salaries, allowances, and pensions for millions of employees and pensioners.

The government has emphasised that any changes will be made with careful consideration of the country’s economic situation and financial needs. While employees are set to benefit, the government assures that there will be no compromise on funds allocated for the nation’s development and welfare schemes.

What Factors Will Determine The Hike In Salary And Pension?

1. The Commission will examine the current economic condition, assessing how much money the government has and its spending capacity.
2. The need for funds for development projects and social welfare schemes will be taken into account.
3. Some pension schemes are fully funded by the government, with no contributions from employees or employers. The financial burden of these schemes will be reviewed to prevent future strain.
4. As most state governments implement the Central Pay Commission’s recommendations with minor adjustments, the Commission will also consider the economic conditions of the states to establish uniform rules across the country.
5. The Commission will compare government employees’ salaries and allowances with those in public sector units and the private sector to ensure competitiveness in the market.

What Is Terms Of Reference?

The ToR serves as a guideline document for the Commission’s work, defining its scope, objectives, and boundaries. It outlines what the Commission will review, including salary structure, allowances, and pensions. Without the ToR, the Commission cannot commence its work.

The government has designed this structure with the interests of employees and pensioners in mind. The 8th Pay Commission aims to enhance the financial wellbeing of employees and pensioners while improving their work and life conditions. The ultimate benefits will depend on the Commission’s recommendations.

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