A major demand is gaining attention ahead of the 8th Pay Commission.
Employee unions, including All India Trade Union Congress, are asking the government to change how Dearness Allowance (DA) is calculated.
DA is a key part of salary and pension for central government employees.
It is revised twice a year based on inflation. But unions say the current formula no longer reflects real living costs.
Although no official decision has been made yet, the issue is being widely discussed as the deadline for suggestions to the Pay Commission has been extended till March 31, 2026.
Why Employees Want a Change in DA Calculation
Unions believe the current system underestimates real expenses.
Here are their main concerns:
Family size is outdated
The current formula assumes a 3-member family. Unions want it increased to 5 members, including dependent parents.
Modern expenses are missing
Costs like internet, digital services, healthcare, and education are now essential but not properly included.
They argue that while expenses have increased significantly, the formula used to calculate DA has not kept up.
How DA Is Calculated Right Now
Currently, DA is calculated using the All India Consumer Price Index for Industrial Workers.
Current DA: Around 58% (July 2025)
Expected DA (Jan 2026): Likely to cross 60%
Some unions are also demanding that DA should be merged with basic pay once it crosses 50%, as was done earlier in 2005.
What Is the Aykroyd Formula and Why It Matters
The DA system is based on the Aykroyd Formula, introduced in 1957.
It considers:
Basic food needs (2,700 calories/day)
Clothing and housing
A standard 3-member family
But unions say this formula is outdated because:
It focuses only on basic survival
It ignores modern lifestyle costs
It does not reflect urban expenses
Changing this formula could directly impact salaries and pensions.
What Could Happen If the Formula Changes
If the government agrees to revise the DA formula, the impact could be significant:
Higher minimum salary
It could rise from ₹18,000 to over ₹30,000
Higher DA payments
Since DA is linked to basic pay, a higher base means bigger increases
Better pensions
Pensioners will benefit as pensions are linked to last drawn salary
Increase in fitment factor
Overall salaries could rise by 50–60% or more
Challenges the Government May Face
Despite the demand, making such changes is not easy.
Some key challenges include:
Higher financial burden on the government
Difficulty in calculating accurate living costs across India
Big differences in expenses between cities and rural areas
This is why previous Pay Commissions have been cautious.
What’s the Latest on the 8th Pay Commission
The 8th Pay Commission is expected to be implemented from January 1, 2026, but final details are still awaited.
Discussions are ongoing on:
Minimum salary
Fitment factor
DA merger
DA formula changes
Employee unions are actively pushing their recommendations.
Next DA Hike: What to Expect
The next DA hike for January 2026 is expected soon.
Likely increase: 2–3%
Expected DA level: 60% or more
Employees may also receive arrears for past months
Final Takeaway
Right now, there is no confirmed change in the DA formula.
But the demand is growing at a crucial time.
If the government updates the formula, it could lead to higher salaries and pensions for millions of employees.
However, due to the financial impact, any decision will be taken carefully.
For government employees and pensioners, the coming months will be very important in deciding whether this long-standing demand finally becomes reality.
