DA hike: What raise will government employees get under 7th Pay Commission? Here’s what to expect from the 8th CPC

As the final leg of the 7th Pay Commission nears, nearly 1 crore central government employees and pensioners are now tracking the next hike in Dearness Allowance (DA) and Dearness Relief (DR), which is due to be announced soon. Although the hike will be effective from July 2025, the actual credit of revised salaries typically happens a few months later — around October — in sync with the festive season.This will be the last DA/DR adjustment under the 7th Pay Commission framework, which came into force in January 2016 and will reset in December 2025 ahead of the 8th CPC’s implementation, according to an ET report.How much DA can employees expect this time?The dearness allowance (DA) hike is calculated using the Consumer Price Index for Industrial Workers (CPI-IW), which is released each month by the Labour Bureau under the Ministry of Labour. The CPI-IW tracks monthly fluctuations in the cost of a fixed basket of goods and services commonlyBased on the 12-month average of the Consumer Price Index for Industrial Workers (CPI-IW), the upcoming hike could be 3%, taking the DA from the current 55% to around 58% of basic pay.

Source: Labour Bureau, Ministry of Labour, ET reportAs per the official formula, DA under the 7th Pay Commission is calculated using the average of CPI-IW values (base year 2001), adjusted using a linking factor of 2.88. The average CPI-IW (2016=100) from June 2024 to May 2025 is 143.3, which translates to 412.7 in the 2001 series. Plugging this into the formula:DA% = [(412.70 – 261.42) ÷ 261.42] × 100 = ~57.8%That gives room for a 3-percentage-point hike.For someone drawing a base pay of Rs 25,000, this translates to an increase in DA from Rs 13,750 to Rs 14,500.What was the last revision?In March 2025, the Centre raised the DA by 2% with retrospective effect from January, moving the allowance from 53% to 55% of basic pay.What happens after the 7th CPC ends?Once the 8th Pay Commission comes into effect from January 2026, the DA will reset to zero — a standard procedure followed during the transition between pay commissions as the base index is restructured.Abhishek Kumar, a registered investment advisor and founder of Sahaj Money, explained as quoted by ET “The linking factor of 2.88 is used to bridge CPI-IW bases. The Labour Bureau had noted that for August 2020, CPI-IW under the 2001 base was 338, while the 2016 base showed 117.4 — giving us 338 ÷ 117.4 = 2.88.”What’s the roadmap for the 8th Pay Commission?The Centre has not yet finalised the Terms of Reference (ToR) or appointed any members to the new pay commission. Most analysts expect the rollout to take another 18–24 months from January 2026, with arrears likely to be paid out once the new structure is implemented.An Ambit Capital report suggests a potential salary bump of around 14% under the 8th CPC for employees earning Rs 50,000 in basic pay, assuming DA reaches 60% before the reset.Historical context Under the 6th Pay Commission, DA had reached as high as 125% of basic pay. For instance, an employee earning Rs 7,000 received Rs 8,750 in DA — more than their base salary — along with allowances totalling Rs 4,550.However, salary growth under the 8th CPC is expected to be the lowest among the last four commissions, primarily due to flatter DA build-up over the years.With the final DA revision under the 7th Pay Commission nearing and the 8th CPC still 1.5–2 years from implementation, this year’s hike may serve as a temporary buffer until the next pay reset kicks in.