8th Pay Commission: What is the difference between basic pay, grade pay and pay level? Expert explains
The 8th Pay Commission is gearing up for its Mumbai meeting on October 22 and 23, right after Dussehra. This is the second key meeting to be held in October 2026, following the recently concluded meeting in Bengaluru on 8 October.
In these meetings held across the country over the last few months, eligible employee unions and associations have tabled their views, grievances, and aspirations on core aspects such as basic pay, grade pay, and pay levels. Along with fitment factors, pension reforms and associated aspects.
Now, it is vital for serving central government employees, associated stakeholders and pensioners to clearly acknowledge that each of the terms discussed above has a distinct meaning and role in determining an employee’s salary. Having a clear understanding of these terms is particularly significant as employees await the 8th Pay Commission's recommendations on revised pay and pensions.
For example, the prominent employee union, i.e., the Staff Side of the National Council (Joint Consultative Machinery) (NC-JCM), has requested that the 8th Pay Commission panel provide employees with a minimum basic pay of ₹69,000. This has been requested on a fitment factor of 3.833.
In the 6th and the 7th pay commissions, the officially approved fitment factors were 1.86 and 2.57, respectively. This time, the unions are pushing for a higher multiplier to ensure that serving central government employees and pensioners can meaningfully combat rising inflation. With these basics in mind, let us discuss the fundamental differences among basic pay, grade pay, and pay levels.
Basic pay is the core component of an employee’s salary, excluding allowances such as Dearness Allowance (DA) and House Rent Allowance (HRA). These allowances are generally calculated using basic pay as the reference. The amount varies according to the employee’s pay level, inflation trend and position in the pay structure.
Grade pay, on the other hand, is slightly different; it was introduced under the 6th Pay Commission. It was added to the pay band to reflect an employee’s position and seniority. However, the 7th Pay Commission discontinued the grade pay system and introduced a pay matrix with 18 levels, making it easier to determine salaries and increments.
Adhil Shetty, CEO, BankBazaar, explained the difference between basic pay, grade pay and pay level in detail, stating, “Basic pay is the core component of a government employee’s salary and the base on which allowances such as DA and HRA are calculated. Grade pay was introduced under the 6th Pay Commission to denote seniority within a pay band. The 7th Pay Commission replaced this structure with a pay matrix of 18 pay levels. For instance, Level 1 starts at ₹18,000, while Level 7 begins at ₹44,900. Under the 8th Pay Commission, the final fitment factor will be key in determining the revised basic pay across each of these levels.”
Currently, the 8th Pay Commission is preparing for a key meeting in Mumbai starting on 22 October 2026. Since its constitution on 3, November 2025, the 8th Pay Commission has held several important discussions in various states and Union Territories, including Delhi, Uttar Pradesh, Ladakh, and West Bengal.
As per the Terms of Reference (ToR), the three-member 8th Pay Commission headed by Justice Ranjana Prakash Desai has been given 18 months to submit its final report to the central government. The tentative date for submitting the final report is around May-June 2027.
The recommendations of the 8th Pay Commission can lead to changes in the existing pay structure, allowances, basic pay, and fitment factor multiplier, depending on the final decisions, internal calculations and cost assessments.
Still, the revised salary cannot be determined until the government accepts and implements the final recommendations of the 8th Pay Commission. Employees should therefore treat proposed fitment factors and projected salary figures until the final report is tabled as estimates rather than confirmed increases.
Shivam writes on personal finance, equity markets, and mutual funds. He has previously contributed to several leading publications, including Moneycontrol. He can be reached at shivam.shukla@htdigital.in
Get Latest real-time updates
Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
HomeMoneyPersonal Finance8th Pay Commission: What is the difference between basic pay, grade pay and pay level? Expert explains
✕
Wait for it…
Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.