Thursday, August 27, 2015

7th Pay Commission gets 4-month extension

THE NDA Government has cleared a four-month extension to the term of the 7th Central Pay Commission on August 26. Set up by the UPA government in February 2014, the 7th Central Pay Commission was to make its recommendations within 18 months. Its term would have expired on August 27.
“In view of its volume of work and intensive stake-holders’ consultations, the 7th Central Pay Commission had made a request to the Government for a four month extension up to December 31, 2015,” a government statement said.
Constituted every 10 years, the Commission’s main job...
is to revise the pay scale of its employees.
The recommendations of the 7th Pay Commission—slated to come into effect from January 1, 2016, would impact around 48 lakh central government employees and 55 lakh pensioners.
The Commission has already completed discussions with various stakeholders, including organisations, federations, groups representing civil employees as well as Defence services and is in the process of finalising its recommendations.
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. The recommendations may significantly increase the 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 commission may also raise hopes for tens of millions of salaried PSU employees.
The Sixth Pay Commission, headed by Justice BN Srikrishna, 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 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 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, among others.

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