8th Pay Commission: 5 Key Salary Factors IIM Ahmedabad Suggested for 7th CPC that may still be relevant for the Next Pay Hike of central government employees

NEW DELHI: Central Government employees across India are waiting for updates on the 8th Pay Commission official notification, including the terms of reference and the appointment of commission members.

While the Union Government is yet to declare details regarding the 8th Pay Commission, insights from a 2015 study by IIM Ahmedabad for the 7th Pay Commission could provide a strong indication of what might influence pay structures this time as well.

The IIM Ahmedabad report identified five major factors that can influence salary hikes, progression, and components for government employees — many of which remain relevant in today’s evolving job and economic environment.

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1. Career Progression

According to the study, employees in roles with strong career progression potential generally witness higher salary growth over the years.

For positions requiring technical expertise or supervisory responsibilities, the study suggested multiple steps in the grade pay hike linked to either expertise or designation levels.

2. Potential Learning on the Job

The report highlighted that if most learning happens early in the career, initial salaries should start lower — like a trainee phase — and increase as the employee gains skills and experience. Continuous learning roles, however, should have steady salary growth built into the pay structure.

3. Labour Market Supply and Demand

When there’s a shortage of qualified candidates in the job market, retention bonuses or higher entry-level salaries should be offered to attract and retain skilled talent. The study also noted that with technological advancements changing job requirements, pay structures must evolve to reflect new skill demands.

4. Attraction of Top Talent

For positions that demand excellent academic performance and high intellectual capability, IIM Ahmedabad recommended offering higher starting salaries to attract top-tier talent right from educational institutions.

5. Retention of Key Competencies

The study also proposed introducing loyalty bonuses, differential retirement benefits, and performance-linked pay for retaining skilled and experienced personnel.

While grade increments were common, the report argued that variable pay components — linked to measurable performance outcomes — could be more effective in motivating employees and rewarding excellence.

The study also shows separating minimum pay conditions from special allowances, suggesting that joining or retention bonuses should be introduced where attracting or keeping talent is a challenge.

Although the 8th Pay Commission’s framework will ultimately depend on the government’s official notice. But many of these insights from IIM Ahmedabad’s 7th CPC study continue to hold relevance today.