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Monday, February 17, 2014

Seventh Pay Commission: What PSUemployees can hope for?

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Soaring hopes for PSU staff?

WITH hardly few

months left for the

general elections,

the United

Progressive Alliance

(UPA) government

has recently

formally

constituted the

Seventh Central Pay Commission. To be headed by

Ashok Kumar Mathur, a retired Supreme Court judge

and retired chairman of Armed Forces Tribunal, the

commission will revise the salary structure of five

million central government employees, including

those in defence and railways and about three million

pensioners. While the constitution of the commission

promises significant increases in pay for government

employees during an election year, it could

significantly increase the future fiscal burden of the

central and state governments. The implementation

of the Sixth Pay Commission increased salaries by...

21 percent resulting in an additional annual burden of

nearly Rs 18,000 crore for the Union government,

besides a pay out of arrears of Rs 30,000 crore. The

next set of recommendations is likely to be

implemented from January 1, 2016. The

announcement also raises hopes for tens of millions of

salaried PSU employees. Here it is pertinent to have a

look at what the Sixth Pay Commission

recommended for the pay hike of the PSU employees.

The Sixth Pay Commission, headed by justice BN

Srikrishna, was constituted on 5 October 2006. It

submitted its report on 24 March 2008, but its

recommendations were implemented retrospectively

from 1 January 2006. The report led to a 6 percentage

points increase in dearness allowance for central

government employees from 16 percent to 22 percent.

Under the Terms of Reference, the Commission had

to take into account, among other factors, the

prevailing pay structure and retirement benefits

available under the CPSEs. The Fourth Pay

Commission was similarly required under its terms of

reference to take into account the pay structure under

the PSUs. Although comparison with the public sector

was not part of the terms of reference of the Fifth Pay

Commission, they did collect information from

various PSUs for the purpose of making a fair

comparison and an assessment of the general climate

of wage revisions in the country.

Both the Fourth and Fifth Pay Commissions found

that the public sector itself was not a homogenous

unit or group for comparison of emoluments. They

observed that there were several differences in terms

of total benefits and emoluments of employees in the

Central Government and PSUs and it was, therefore,

difficult to compare the emoluments of Central

Government employees and those in PSUs. Fourth

Pay Commission concluded that the pay structure of

Central government employees cannot be based on a

simple comparison of the pay scales of posts at the

lowest level in the Public Sector Undertakings. The

PSUs were created by Government for specified

purposes and had adopted their own pay structure.

The nature of work and conditions of service were

different.

The Fifth commission making similar observations in

regard to the heterogeneity in the pay scales across

the public sector, did not concede the principle of

parity between the Government and the comparison

with the public and private sector.

In the changing paradigm of a competitive

environment, the Sixth Pay Commission observed

that the issue of comparison with the public sector has

necessarily to be examined as the PSUs needed to

function in a competitive environment and have the

commercial objective as the predominant objective. A

comparison of salaries between the public sector and

the Government may not be appropriate as it would

not be a comparison between similarly placed entities.

The Sixth Pay Commission studied the mechanism by

which the salaries of employees of public sector

undertakings are determined and the conditions that

govern them with the aim of examining if any

comparison could be drawn.

The department of public enterprises (DPE) functions

as the nodal department on the policy related to wage

settlement of unionized employees, non-unionized

supervisors, executives and board members. The

public enterprises are categorized in 4 schedules viz.

A, B, C and D based on quantitative factors like

investment, capital employed, net sales, profit before

tax, number of employees, etc.; qualitative factors

such as national importance, level of technology,

prospects for expansion and diversification, etc. as

well as on the strategic importance of the corporation.

The pay scales of chief executives and full time

functional directors in Public Sector Enterprises

(PSEs) are determined as per the schedule of the

concerned enterprise.

The Commission observed that in a bid to woo more

efficient staff to the Group A posts and to technical

posts for which a demand exists in the market, the

Commission recommended a higher starting salary

for Group A posts. It said the Government should

have the flexibility to offer a market driven salary to

highly qualified scientific and technical personnel

whose skills are in demand in the private sector. The

higher package will, however, be accompanied with a

fixed term contract which could be altered based on

performance, it recommended.

The Commission also suggested regarding the

appointment to selected posts at higher levels on

contractual and tenurial basis where market driven

salaries could be paid in order to attract the best

possible expertise to the Government. Further, taking

into account the fact that a large portion of the salary

in the private sector comes from performance related

payments, the Commission has recommended

introduction of performance related incentives in the

Government. This is also expected to bridge the gap

vis-à-vis the private sector.

The Central Government had earlier said that in so

far as wages for CPSE workers are concerned no

budgetary support for the wage increase is to be

provided by the Government and resources for

meeting the increased obligations must be internally

generated and must come from improved

performance in terms of productivity and profitability

and not from the Government. The validity period of

wage settlement would be 10 years with 100 percent

DA neutralization w.e.f. 1.1.2007 and the revision

would be subject to the condition that there is no

increase in labour cost per physical unit of output

except in rare cases.

CPSEs which have incurred a loss during all the three

financial years preceding the proposed wage

negotiation have also been allowed to enter into

negotiations provided they give an estimate to their

ministry as to how resources would be generated by

them to meet the extra expenditure arising out of

implementation. In sick PSUs, no revision is to be

allowed until BIFR approves the revival plan for these

enterprises.

The Sixth Commission called for detailed information

on the package of benefits available in the PSUs in the

power and the petroleum sector, most of which are

profit making, for making a comparison. The

examination of inputs received has revealed that

while the pay scales of executives and non-unionized

supervisory staff are generally comparable across

Posted by y adav k at 9:00 AM

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Labels: Basic Pay , BIFR, DA, DPE, Pay Hike, Seventh

Pay Commission

4 comments:

1. AnonymousFebruary 25, 2014 at 12:23 PM

While framing any scale structure, basic befits like ,medical, food/DA shll be more or less equall for allthe categories... please

ReplyDelete

2. AnonymousMarch 26, 2014 at 10:35 PM

all the genius, forgot the sick psu employees(indianpsu slaves),their not responsible for sick,govtfoolish policy corrupted politicians highlyeducated vested interest bureaucrats is the onlyreason.but they are all enjoying wage revisionbenefits punishment for sick psu employees.stillsome sick psu employees getting 1987 pay scale in2014?mr.chidambaram did you aware about this?.

ReplyDelete

3. AnonymousMay 3, 2014 at 12:02 AM

In sick PSUs, no revision is to be allowed untilBIFR approves the revival plan for theseenterprises.BRPSE recomended the revival butchidamparam reject the proposal then ,,how theyget wage revision? highly educated most powerfulbureaucrats pl answer this,why wage hike foryou.pl think how to revive the sick psu.what is thereason,then only you will be allowed for wagerevision,otherwise your wage revision is from oursins.you want that kind of revision? what is yourpart for reviving the sick psu? shameless officers.(forgive me for my English).

ReplyDelete

4. AnonymousJuly 16, 2014 at 11:13 PM

Recently SAIL management agreement done fornon-executive of SAIL more than Rs50,000/-Basic Pay in a S-11 Grade Where as an executive ofE-1 grade Getting only Rs 20600/- which is veryshame full and harassment to SAIL executives. Soit is expected a comparative Pay Scale fromSeventh Central Pay Commission.

ReplyDelete

PSUs owing to the fact that salary revision is carried

out based on the recommendations of the Committee

set up by DPE and not by individual PSUs,

considerable variation in the pay scales of workers

across PSUs exists due to the practice of separate

wage negotiations by individual PSUs. Therefore, even

among PSUs, a comparison cannot be made, observed

the commission.

The Sixth Pay Commission made certain

recommendations on pay scales and allowances

keeping in view the concepts which are in existence in

PSUs such as percentage based increments,

introduction of performance related incentives,

interest subsidy on loans, voluntary retirement

schemes, etc.

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