8th CPC likely to rely on the Aykroyd formula; Fitment of 1.92 to 2.86 expected

As the 8th Pay Commission looms on the horizon, there is significant speculation about its approach to determining salary and pension hikes for central government employees. Based on historical precedent, it is anticipated that, much like the 7th Pay Commission, the 8th Pay Commission will rely on the Aykroyd formula to address the current economic realities. Here, we delve into the Aykroyd formula, its origins, and its role in shaping past and future pay commission recommendations.

The Aykroyd Formula: A Foundation for Fair Wages

The Aykroyd formula, developed by Dr. Wallace Aykroyd, a nutritionist, was designed to estimate the minimum cost of living. This formula focuses on calculating wages based on the nutritional needs of an average worker and their essential living requirements, such as food, clothing, and housing.

In 1957, the 15th Indian Labour Conference (ILC) adopted the Aykroyd formula to set minimum wages for workers. This framework considers a worker’s family, comprising a spouse and two children (equal to three consumption units). Key highlights of the Aykroyd formula include:

• Caloric Needs: The formula emphasizes a balanced diet, suggesting a minimum of 2,700 calories per adult.

• Nutritional Balance: It underscores the importance of incorporating animal proteins, such as milk, eggs, and meat, for their superior nutritional value.

• Essential Expenses: The calculation extends beyond food to account for other basic living necessities like clothing and shelter.

How the Aykroyd Formula Shaped the 7th Pay Commission

The 7th Pay Commission, implemented in 2016, significantly raised the minimum basic pay for central government employees, increasing it from ₹7,000 to ₹18,000. This hike was based on the Aykroyd formula, which considered the cost of living and nutritional requirements of the time.

To achieve this revision, the 7th Pay Commission applied a fitment factor of 2.57, which was used to update salaries and pensions for employees and pensioners. This fitment factor became the foundation for a new pay matrix that structured pay levels and annual progressions while accounting for inflation. By using the Aykroyd formula, the commission ensured that wages were fair, need-based, and aligned with the prevailing economic conditions.

What to Expect from the 8th Pay Commission

The 8th Pay Commission is likely to adopt a similar methodology, blending the Aykroyd formula with updated market data to address current living costs. Reports suggest that the government might consider a fitment factor ranging from 1.92 to 2.86. If the upper limit of 2.86 is applied, the minimum basic salary for a government employee could increase from the current ₹18,000 to ₹51,480, while pensions could rise from ₹9,000 to ₹25,740. On the lower side, the minimum salary would be ₹41,000.

How Salary and Pension Hikes Are Calculated

Salary and pension revisions are determined by multiplying the fitment factor by the previous minimum salary or pension amount. For instance:

• Salary Hike Example: ₹18,000 x 2.86 = ₹51,480

• Pension Hike Example: ₹9,000 x 2.86 = ₹25,740

While these figures remain speculative, the actual recommendations of the 8th Pay Commission and the final approval by the government will ultimately determine the fitment factor and corresponding salary adjustments.

Next Steps for Central Government Employees

With the announcement of the 8th Pay Commission’s appointment, central government employees eagerly await further developments. Once the three-member panel is constituted, it will have approximately 11 months to draft and submit its recommendations to the government. Key responsibilities of the commission include:

1. Determining the Fitment Factor: The cornerstone for revising salaries and pensions.

2. Proposing Modalities: Outlining other critical aspects of pay structure and benefits for employees and pensioners.

Conclusion

The Aykroyd formula has long been a cornerstone for determining fair wages and addressing economic challenges faced by government employees. As the 8th Pay Commission embarks on its task, it is expected to uphold this legacy while incorporating contemporary data to ensure just and equitable salary adjustments. For central government employees, the outcomes of this commission hold the promise of aligning their earnings with current living standards, providing much-needed financial relief and security.