Over the past few months, millions of central government employees and pensioners in India have been eagerly waiting for the implementation of the 8th Pay Commission, which aims to revise salaries and pensions. Amid various demands from employee unions, a key highlight is the expected change in the Dearness Allowance (DA) calculation formula.
As of now, there is no official confirmation regarding this from the government, but the issue has been in the spotlight for quite some time. Recently, the 8th Pay Commission allowed more time for stakeholders to respond to its 18-point questionnaire. The submissions are now accepted until March 31, 2026.
Why Unions Are Demanding Change In DA Formula?
Traditionally, the central government revises DA twice a year, around the festivals of Holi and Diwali. Last year, the hike was announced on March 28. Going by this pattern, officials are expecting the revision for this year to be declared by the end of March or early April. Notably, this increase will be effective from Jan 1, 2026, which means that employees and pensioners will receive arrears for the previous months.
Being a critical component of salary and pension for the government employees and pensioners, DA is revised based on inflation data. But the unions have claimed that the current method does not reflect the real cost of living in today's times.
Unions like All India Trade Union Congress (AITUC) believe that the present system underestimates the actual household expenses. They have stated that the formula to calculate DA has not been changed even when the living expenses have grown significantly over the years.
They have pushed for a five-member family unit instead of three and asked for inclusion of modern expenses like internet, digital services, healthcare, and education.
Also, they have called for merger of DA with basic pay, restoration of the Old Pension Scheme (OPS), and better fitment factor under the 8th Pay Commission among others.
Currently, the DA stands at 58%, effective July last year. Based on the All India Consumer Price Index for Industrial Workers (AICPI-IW) data, a 2% rise is almost certain, that will take it to 60%. However, there could also be a possibility of a 3% hike.
Aykroyd Formula: What Is It?
Adopted in 1957, Aykroyd Formula forms the base for minimum wage calculations. Its key focus is on nutritional needs (2,700 calories/day), clothing and housing, along with a standard 3-unit family model.
But several unions have said that this framework is outdated and needs to be changed. They are of the view that it does not reflect modern family structures and even ignores digital and lifestyle expenses.
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If the central government accepts the demands of unions to revise the formula, then it could have major impact.
Government employees could expect a higher basic salary, with major shift from 3 to 5 consumption units pushing minimum pay beyond Rs 30,000, which at present is Rs 18,000.
DA gets calculated as a percentage of basic pay. A higher basic salary would mean higher DA payouts along with larger periodic hikes.
Pensioners can also benefit from this, since pension is directly linked to the last drawn pay, while Dearness Relief (DR) rises along with DA.
However, implementing such changes might not be that easy for the government, since there are many complexities.
A major hike in salaries and pensions could drastically increase government expenditure. Moreover, it is quite difficult to calculate a realistic cost-of-living basket across the country. Moreover, cost of living varies between cities and rural areas.
ALSO READ: Deadline Extended For 8th Pay Commission Questionnaire Submissions: Full Details Here
The 8th Pay Commission is expected to go into effect from Jan 1, 2026.
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