Performance Related Pay

Examining the Feasibility of Performance Related Pay (PRP) in Government

Pay and allowances in the Government are linked to service-incremental salary scales and promotions under different service rules. Promotions have been used as a tool to provide incentive especially at senior management levels. Pay increases are based on annual increments and the salaries depend more on length of service and grades rather than the performance of an individual employee.

The aim of the study is to examine the feasibility of working out a model whereby a base salary is attached to each post based on the conventional criterion of skills and responsibility; simultaneously, a second component is introduced that is payable as a percentage of the salary on the basis of productivity and the performance of the employees, either individually or as a group.

Terms of reference: The study should examine the correct basis of pay increases and their relation, if any, to performance and productivity of the employees; and examine possibilities of evolving a direct correlation between PRP and delivery of services to citizens/organization/other departments, as the case may be.

The study should evolve measurable, quantifiable criteria for judging performance and productivity of different grades of employees in various government organizations* depending on the nature of their work and the relationship with their users/clients.


The study should, inter alia, examine international best practices in this regard.


The study should develop a model suited to Indian conditions which is transparent, measurable, fosters accountability and is linked to deliverables.


The study should devise means by which PRP can be introduced in the Government. Specifically it should consider the following:


Should PRP be applied to all jobs and all sectors, or higher managerial positions /percentage of jobs or sectors to begin with.


Should PRP be individual based or group based.


Should specific percentages be prescribed for restricting number of posts to which PRP is given.
The study would be conducted by Indian Institute of Management, Ahmedabad.

Team Leader Contact Details:
Prof. Biju Varkkey
Indian Institute of Management Vastrapur, Ahmedabad, 380015
Tel. 079-26324874
Email: bvarkkey@iimahd.ernet.in

The conceptual frame work includes the following:

Identification of metrics for five measures of performance viz.
(i) Competency/ skill
(ii) Effort /activity
(iii) Result/ output/ value added measures
(iv) Efficiency/ productivity, and
(v) Quality/ customer satisfaction.


Suggesting Modified Pay structure having flexibility to implement PRP viz. Pay structure having fixed and variable components with variable component linked to performance measures.


Suggest enabling conditions for PRP.
The Ministries/ cluster of Ministries selected are:

Cluster I
Ministry of Health & Family Welfare (D/o Health & Family Welfare)
Ministry of Urban Development (D/o UD & A)


Cluster II
Ministry of Corporate Affairs
Ministry of Finance (D/o Revenue, Central Board of Direct Taxes and Central Board of Excise and Customs)


Cluster III

Ministry of Science & Technology (D/o Science & Technology)
Ministry of Communication & Information Technology (D/O Telecommunications-Posts)


Ministry of Defence (D/O Defence and Ordnance Factories)


Ministry of Home Affairs (D/O Home Affairs)


Ministry of Railways


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Estimating the Compensation Package for Government Employees and the Cost to the Government

The aim of the study is to assess the total cost incurred by the Government for Government employees in various grades and sectors. The study will take into account salary, various allowances as well as the other benefits like housing/ HRA, transport facilities/ transport allowance, telephones, free passes/ LTC, bungalow peons/ orderlies, pensionary benefits, free rations (where ever applicable), job security and any other benefits, whether tangible or intangible, provided by the Government to their employees.

The Terms of Reference of Study are as under:

To work out the cost incurred by the Government in paying the pay, allowances and all other benefits whether monetary/ in kind (tangible/ intangible) to their employees and to compute cost per employee to the government in each of the pay scales prevailing in the Government for employees who enjoy these benefits as well as those who do not.


To work out in monetary terms the benefits, whether in form of allowances or in kind, available to the employees in various sectors of the government like Armed Forces, Police, Railways and Posts and to study the efficacy of these benefits in meting their objectives.


To determine the feasibility of evolving a compensation package that would compensate all the benefits presently available in various pay scales/ sectors in purely monetary terms as a more efficient way of compensating the employees.


To study the monetary value that can be attached to security of and the protection under Article 311 of the Constitution available to the Government employees. Whether this can have any impact on the emoluments payable to the Government employees given the fact that the extant rules also preclude an easy exit from a Government job.

The study is being conducted by the Xavier Labour Relations Institute (XLRI), Jamshedpur and is expected to be completed within a period of 4 months.

Team Leader Contact Details:
Prof. R. K. Premarajan Xavier,
Labour Relation Institute
Jamshedpur 831001
Tel. No. 91 – 657 – 2225506 – 12
E mail : prem@xlri.ac.in

Methodology:

The study would be carried out in the following phases:-
Phase I – Computation of cost using available data with respect to pay and allowances of all government sectors.

Phase II – Assessment of monetary value of tangible and intangible benefits with inputs from recipients and from experts.

Phase III – Assessment of some of the understated benefits of working for the government viz. job security & protection, Article 311, cost of no easy exit, etc. Assessment of monetary value attached to benefits and impact on the pay mix.

Phase IV – Discussion on the efficacy of having all cash pay along with the feasibility of such a pay structure.

Data for the purpose of the study will be collected in two parts namely, primary and secondary. Primary data will be collected with the purpose of arriving at the efficiency and efficacy related conclusions through interviews, questionnaires and focus group discussions. Secondary data will be obtained through records, reports, statements, rules and regulations currently in force. This will enable the study to calculate the cost of compensation, both monetary and the cost relating to other benefits.



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Study on Terminal Benefits of the Central Government Employees



Long Term Measures for Achieving Reduction in the Liability of the Government towards Terminal Benefits of Central Government Employees.

Aim of the study:

The study, in the light of the existing scheme of retirement benefits of Central Government Employees, including All India Services, Armed Forces personnel and employees of UTs, appointed before 1.1.2004, will make an assessment of the existing and future liability of the Government towards these benefits in the next three to four decades keeping in view the age profile of the workforce and suggest effective ways and means of reducing the budgetary liability on this account. Towards this aim, suitable changes in the existing scheme of terminal benefits could also be suggested.

The Terms of reference of study:

To analyse the expenditure presently being incurred by Government, under the existing scheme of retirement benefits available to Central Government Employees under consideration, make projections thereon and suggest ways to meet this liability.


To see the age profile of existing government employees as had joined before 1.1.2004 and to assess the liability likely to arise towards their terminal benefits in the next three to four decades.
To suggest various options for suitable self sustaining models to finance the pensions of Central Government employees with the final objective that the funds so devised are able to meet substantially the entire pension liability of the Government.
To assess the financial liability that will need to be initially incurred by the government for implementation of such self sustaining models.
The study is being conducted by the Institute for Social and Economic Change, Bangalore and is expected to be completed within a period of 7 months by September 2007.

Team Leader Contact Details:
Dr. K. Gayithri,
Centre for Economic Studies and Policy,
Institute for Social and Economic Change. Nagarbhavi PO Bangalore – 560072
Tel No. 080 23217010
E mail : gayithri@isec.ac.in

Methodology:

The Study proposes a projection of terminal benefits related expenditure and some other options which will be considered after interaction with the stakeholders.

Existing staff details of each category along with their age profile and the terminal benefits, based on its availability, will be collected and used for making estimations for the future. Existing data/projections currently available would be examined and attempts would be made to adopt better methodology. The impact of demographic transition in terms of increasing life expectancy would be meaningfully captured in the study. The study would use appropriate econometric tools that take into account all possible changes while making the estimates.