7th CPC recommends performance-linked pay for all employees

The Seventh Pay Commission has recommended performance-linked pay for all central government employees, but has suggested that each department be given the flexibility to work out its own matrix.

The panel has suggested that the incentive could be in the form of a "non-additive cash component" of their current pay, paid at the end of the fiscal year and should not be linked to savings.

Performance-linked pay has been proposed by previous pay panels as well as the Administrative Reforms Commission but has not been talked about, leave alone implemented.

The SPC has, however, suggested that the performance bonus, currently paid to junior staffers in the government, should be linked to the results framework documents, which sets annual targets for departments, and has also called for reworking the annual performance appraisal system for employees.

Performance-related pay (PRP) is widely used in the private sector and is used to reward the better performers in the system. The absence of any incentives in the government along with time-bound promotions, irrespective of performance, is seen as a major dampener in the current system.

But the government has chosen to ignore the earlier recommendations as they were seen as not just cumbersome to implement but would have annoyed a majority of employees, a major vote bank in cities such as the Capital.

The Seventh Pay Commission has sought to address the first concern. "Any attempt to implement PRP in a governmental framework has to be preceded by proper understanding of the system, adequate planning and capacity building at various levels. The commission feels that given the enormous size of the government and the wide diversity in the basic structures, sizes and patterns that are observed across ministries/departments/divisions, it would be erroneous to recommend a one-size-fits-all model for PRP," it said.

The panel has said that proper training and capacity building are pre-requisites before launching PRP.