8th Pay Commission: Know the Aykroyd Formula Used by 7th Pay Commission to Decide Salaries

As the formation of the 8th Pay Commission is under process, it’s important to reflect on the approach taken by the 7th Pay Commission to determine salary structures.

This panel’s method aimed to ensure fairness, keeping in mind the cost of living and the welfare of central government employees. Let’s explore how it worked.

How Did the 7th Pay Commission Decide on Salaries?

The 7th Pay Commission used a unique methodology that focused on ensuring fair wages for employees, incorporating elements such as basic living costs and family needs. This approach was grounded in the Aykroyd formula, which helped establish the minimum wage.

The wage calculation was based on the need for a balanced standard of living, considering the cost of living at the time. Using the Aykroyd formula, the 7th Pay Commission recommended a ₹18,000 minimum wage for central government employees.

Dr Wallace Aykroyd, a nutritionist emphasised that a balanced diet was crucial for workers, including both proteins and fats. His recommendation for a daily intake of 2,700 calories aimed at ensuring that workers received sufficient nutrition to sustain moderate physical activity.

The Aykroyd formula considers workers’ nutritional needs alongside their basic living expenses like food, clothing, and housing. It was endorsed by the 15th Indian Labour Conference (ILC) in 1957 to establish fair wage norms, taking into account the needs of a worker’s family.

Key Changes Introduced by the 7th Pay Commission

The 7th Pay Commission, which came into effect on January 1, 2016, introduced significant changes:

• Updated Salary Structure

Under the 7th Pay Commission, the minimum basic salary was increased to ₹18,000, with a fitment factor of 2.57. This resulted in an overall salary hike of 23%–25% across various employee categories.

• Enhancements in Pension Revisions

The 7th Pay Commission also boosted the minimum pension to ₹9,000, continuing its focus on improving the financial well-being of retired employees.

• Revised Allowances Amid Inflation Concerns

While the 7th Pay Commission made periodic revisions to allowances, some criticisms emerged regarding its ability to effectively counter inflation. By 2024, the revised Dearness Allowance (DA) reached 53%, helping employees manage inflation-related financial pressures.

• Introduction of Health Insurance Scheme

A new health insurance scheme was introduced for employees and pensioners, offering added financial protection against rising medical expenses and contributing to their overall well-being.

Conclusion

As the 8th Pay Commission takes shape, the legacy of the 7th Pay Commission’s approach to salary structuring remains significant. The focus on fairness, nutritional standards, and the welfare of government employees laid a solid foundation for future salary and pension revisions. As we await the new panel’s recommendations, it’s clear that a balance between fiscal responsibility and employee welfare will continue to be a guiding principle for future salary structures.

Also Read: 8th Pay Commission: Check Comparison of 6th and 7th Pay Commissions.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.