Pay Commission mulls pay for performance

IIM-A group to study feasibility of new salary model.

The sixth central Pay Commission is examining the feasibility of introducing performance-linked salaries for government employees.

The commission has constituted a study group headed by Indian Institute of Management -Ahmedabad Professor Biju Varkkey to develop a model on these lines.

The study group has submitted interim reports and was expected to send its final report soon, a Pay Commission official told Business Standard. The group is expected to evolve a system of linking performance-based pay to the actual delivery of services to citizens.

Declining to reveal details of the interim findings, the official added that the Pay Commission's report will be submitted next March, slightly ahead of the original deadline of April 2008.

Performance-linked pay is a marked departure from the present practice. If implemented, it will align government pay more closely to corporate sector compensation practices.

Pay increases for both central and state government employees are currently based on annual increments, and salaries depend more on length of service and hierarchy than annual performance.

The Varkkey group has been asked to work out a model in which a base salary is attached to each post based on the conventional criteria of skills and responsibilities.

A second component of salary could be introduced that pays a percentage of the basic salary based on performance and productivity. This could be determined either individually or as a group.

The group has been asked to evolve measurable and quantifiable criteria for judging performance and productivity of different grades of employees in various government organisations depending on the nature of their work and relationship with their clients.

The study is also expected to consider international best practices. It will also suggest whether performance-related pay should be applied to all jobs in all sectors or to higher managerial positions in certain sectors to begin with.

The sixth Pay Commission was constituted last year by the United Progressive Alliance government. It is chaired by Justice B N Srikrishna. The award of fifth Pay Commission, which was set up in 1994 and implemented in 1997, was widely blamed for setting back central and state finances.