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It’s high time govt scrapped archaic system of Pay Commissions. Here’s why.

Every private sector employee knows that salary hikes are linked to performance. This truism of management is totally lost in the public sector, where duration of employment is linked to salary hikes. And this is where the Seventh Pay Commission misses the mark. It proposes a hike in minimum salaries but does not talk about performance.

How can an employee deserve a higher pay if the only criteria is attendance in office and not performance? Unfortunately, bureaucratic systems are not designed for execution. They do measure performance of a department or individual employees. They are set for following certain set up steps in a process, not the outcome of a process. They do not even measure efficiency in the processes. That is the most important issue from competitiveness point of view. Ease of doing business in a country is measured by number of clearances, interactions and time taken in government interfaces.

Bureaucrats on the other hand measure their success by the size of their department’s budget. Babus do not want to work in ministries which have paltry budgets as they feel it undermines their importance and growth. Budgets for a ministry are unfortunately directly linked to the number of employees or bloat.

If a new scheme is announced by the government, the nodal ministry rejoices as it will be able to commandeer more people and resources. This is the mindset of the system. And this is why the system is paralysed.

The NDA government under Narendra Modi is basically fighting against this paralysis. He is trying to drag a bureaucracy steeped in socialist attitudes into a 21st century market economy. The extremes may not be good in both these ideologies but performance and execution is important nevertheless.

The challenge of this Pay Commission and any other is its objectives are never clearly defined. Take this gem of an objective:

To work out the framework for an emoluments structure linked with the need to attract the most suitable talent to government service, promote efficiency, accountability and responsibility in the work culture, and foster excellence in the public governance system to respond to the complex challenges of modern administration and the rapid political, social, economic and technological changes, with due regard to expectations of stakeholders, and to recommend appropriate training and capacity building through a competency based framework.

If anybody can understand the above objective and deliver on it is a miracle. While there has been discussion galore on the impact of the increase on the fiscal deficit, the rationale for the increase is almost taken as a fait accompli.

Silver linings are sought in this increase in salary on how it will drive consumption and the growth of consumer durable industry. Such ridiculous conclusions are arrived at only because nobody wants to question the fundamental rationale for this hike.

Actually, the Pay Commission is not just about increasing salaries. It has the wherewithal to overhaul the system but it never does. It just sticks to increasing salaries.

It’s time to look at this archaic system of appointing a commission which does nothing more than appeasing all its constituents except the citizens of the country.

Even when it comes to bonus, which is now increasingly referred to as variable pay in corporate lingo, the pay commission can do more. But just look at the verbosity of the following objective in the terms of reference:

To examine the existing schemes of payment of bonus, keeping in view, inter-alia, its bearing upon performance and productivity and make recommendations on the general principles, financial parameters and conditions for an appropriate Incentive Scheme to reward excellence in productivity, performance and integrity,

In all fairness the Seventh Pay Commission report does devote a few pages in its 880 page report to performance pay. It recommends the introduction of the performance pay for bureaucrats as it believes that the Results Framework Document (RFD) has now been implemented by most departments in the government. The performance pay is expected to be linked to the RFD, it even recommends that the payment of the bonus should not be automatic as it has been all these years. It should be based on the annual performance basis.

“The commission has also recommended that all the non-performers in the system should be phased out after 20 years.” Twenty years is a lifetime and non-performance in the private sector is a quarterly issue. By recommending such a long term for non-performance the commission has effectively killed the performance measure completely. And it does not recommend any procedure for this so called phase out beyond voluntary retirement.

The Commission is still living in some archaic world and still believes: “employee motivation and performance are not exclusively linked to performance related pay.”

With such an outlook it is difficult to expect much. This is the biggest challenge of governance, jobs are taken for granted, salary hikes are guaranteed and performance is never monitored or rewarded.



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Sources: firstspot, The Financial Express.

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Editorial Team of LaughaLaughi