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Performance-linked pay system may be introduced


03 Oct, 2013 10:51a.m.

The government last week cleared the setting up of the 7th Central Pay Commission for its employees. The move may be prudent politically but it will add to the problems of the next government which will also be burdened with the impact of the Food Bill on financial and the Land Bill on investment.

A close look at the composition of the central government staff and pay structure clearly indicates there is not much that the government can do (or be willing to do) as far as curtailing the expenditure on this account is concerned. But what the CPC can do certainly is target hikes better to reward performers. A transparent and effective performance-linked pay system devised carefully, rather than the current token one, can be a catalyst for improving the government functioning.

The Sixth Pay Commission in paragraph 2.5.8 of its report recommended introduction of a new performance based pecuniary benefit, over and above the regular salary, for the Central Government employees. The Government of India accepted the recommendations and decided that the detailed guidelines will be issued by the nodal ministry. Performance-Related PL pay ncentive will be payable taking into account the performance of the organization and employee during the period under consideration. It is based on the principle of differential reward for differential performance.

Read : 6th CPC : Chapter 2.5 on Performance Related Incentive Schemes

Then, it had also suggested the introduction of performance related incentive scheme (PRIS) in the government under which employees would be given pecuniary remuneration over and above the pay, replacing the ad hoc bonus scheme.

The cabinet secretariat has developed result framework document (RFDs) and the ministries and departments have engaged themselves into this exercise which is being monitored now on a regular basis. According to the plan, at the end of the financial year, all ministries/departments will list out their achievements in a report against the agreed results formalised at the beginning of the year. This report will be finalised by May 1, and then will be placed before the Cabinet by June 1. This means the government will have a fair idea of a ministry or a department's performance for each financial year. So, why not embed this also, along with an improved individual performance-linked system, in the overall pay structure?

But this is not going to be easy to implement. Talk to any number of government officials and they will give numerous reasons why a performance-linked system can't be implemented and how this will bring in subjectivity. But, the issue is how will you improve performance then? The larger problem is that the model adopted by the central government is replicated by the states and efficiencies and inefficiencies both get percolated down the line. If the performance has to be linked in any meaningful way to pay, it has to begin earnestly from the centre.

The 7th pay commission can break away from the past by suggesting ways to remodel the way government works instead of sticking to formulating formulas for hiking pay packages.


Performance Related Incentive Scheme (PRIS) accepted by Government

Bonus Points : Stage set performance-linked payouts

Govt moots performance based salary (40%) for central government employees

Performance-based incentive scheme now on a voluntary basis

Performance Linked Incentive to be announced shortly


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