determination of salaries in cpses

7/30/2019 Determination of Salaries in Cpses

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DETERMINATION OF

SALARIES IN CPSEs

2ND PAY REVISION COMMITTEE


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BASIC FACTS RELATING TO

CENTRAL PUBLIC SECTOR

UNDERTAKINGS DEPARTMENT OF PUBLIC ENTERPRISES (DPE)

HAPPENS TO BE THE NODAL AGENCY FOR POLICYRELATED TO WAGE SETTLEMENT IN CPSEs

CATEGORISATION OF CPSE: A, B, C, D AND NON-CATEGORISED. CATEGORISATION BASED ON QUANTITATIVE AND

QUALITATIVE FACTORS QUANTITATIVE FACTORS:

Investment, Capital Employed, Net Sales, PBT, Number ofEmployees

QUALITATIVE FACTORS: National Importance, Level of Technology, Prospects for

Expansion and Diversification, Strategic Importance of theCorporation.


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BASIC FACTS RELATING

TO CPSE NUMBER OF CPSEs AS ON 31-03-2007:

248 (57 SCHEDULE A, 75 SCHEDULE B, 50 SCHEDULE C, 6SCHEDULE D AND THE REMAINING NON-CATEGORISED).

OTHER CATEGORISATIONS ON THE BASIS OF POWERVESTED IN BOARD OF DIRECTORS OF THE COMPANY ANDOTHERS ON THE BASIS OF PROFIT OR LOSS MAKING Category No. of CPSEs (As on 30.5.2008) Navratna 16

Miniratna, Category I 41 Miniratna, Category II 13 Profit making 156 Loss making 59 Listed Companies 45 Non-listed Companies 202


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BASIC FACTS RELATING

TO CPSE TOTAL EMPLOYMENT IN CPSE=16.5 LAKH 22% OF THIS (ROUGHLY 3.65 LAKH) ARE

EXECUTIVES AND THE REST, 78% OR 13LAKH ARE UNIONISED WORKERS.

DA PATTERN: MOST CPSEs FOLLOW IDAPATTERN AND FEW (69 to be exact) CDAPATTERN

AROUND 86% OF THE WORKERS ANDEXECUTIVES ARE COVERED UNDER IDA

AND THE REST CDA PATTERN.


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MECHANISM OF SALARY

DETERMINATION IN CPSE The pay revision for board members, executives

and non-unionized supervisors under the IDApattern is done based on recommendations ofCommittees set up for the purpose by the Government.

The periodicity of such revision was 5 years before 1997and has thereafter been modified to 10 years. The latestPay Revision Committee was set up vide Resolutiondated 30th September, 2006 which submitted its reportin 2009.

In respect ofworkmen following IDA pattern scales ofpay, the managements of Central PSEs have thefreedom to negotiate revision of pay scales with theworkmen. Previously it was done through Wage Boards.


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MECHANISM OF SALARY

DETERMINATION IN CPSE In respect of workmen following IDA pattern of

scales of pay Government has allowed the PSUs toopt for either a 10 year periodicity of pay revisionwith 100% neutralization of DA or a 5 yearperiodicity on the basis of graded neutralization.The Central PSEs opting for 5 year wagenegotiation for workers were allowed wagenegotiation for a period of 5 years with effect from1.1.2002.

In the case of employees (not workmen) underCDA pattern of pay scales, pay revision is carriedout only as and when similar changes are effectedfor Central Government employees through CentralPay Commission.


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CURRENT POSITION ON

WAGE NEGOTIATION For Profit making CPSEs:

The Central Government, in November, 2006, conveyed theirdecision that the next round of wage negotiations (which fallsdue on a general basis from 1.1.2007) with the workers of

Central PSEs may be undertaken with the tradeunions/associations by the respective managements of theseenterprises. According to the guidelines issued, there would befreedom to negotiate keeping in view the generation ofresources/profits by the concerned enterprises.

No budgetary support for the wage increase is to be provided bythe Government and resources for meeting the increased

obligations must be internally generated and must come fromimproved performance in terms of productivity and profitabilityand not from the Government.

The validity period of wage settlement would be 10 years with100% DA neutralization w.e.f. 1.1.2007 and the revision wouldbe subject to the condition that there is no increase in labourcost per physical unit of output except in rare cases.


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CURRENT POSITION ON

WAGE NEGOTIATION For loss incurring CPSEs:

Central PSEs which have incurred a loss during

all the 3 financial years preceding the proposedwage negotiation have also been allowed toenter into negotiations provided they give anestimate to their Ministry as to how resourceswould be generated by them to meet the extra

expenditure arising out of implementation. Insick PSUs, no revision is to be allowed until BIFRapproves the revival plan for these enterprises.


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RECOMMENDATIONS OF

THE 2ND PAY REVIEW

COMMITTEE CHAIRMAN: JUSTICE M J RAO, RETD

JUDGE, SCI

Members: Dr Nitish SenGupta (FormerMember Secretary Planning Commission),Shri P C Parakh (Former Secretary, Dept ofCoal) and Shri R S S L N Bhaskaradu

(Former Director, MUL and Chairman PublicEnterprises Selection Board)

Ex officio Member: Secretary, DPE, GoI.


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RECOMMENDATIONS

RELATIVITY: COMPENSATION PACKAGES FOREXECUTIVES OF CPSE TO BE INDEPENDENT OFCENTRAL GOVERNMENT SERVANTS BUT TO BE

PROGRESSIVELY ALIGNED WITH THEIRCOUNTERPART IN THE PRIVATE SECTOR.

CATEGORISATION OF CPSE: 5 INSTEAD OF 4: A+,A, B, C , AND D

COMPONENTS OF PAY PACKAGE: A: FIXED PAY

BASIC PAY

RISK PAY


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RECOMMENDATIONS

FIVE SETS OF SCALES OF PAY CORRESPONDING TO FIVECATEGORIES OF CPSEs Public Sector Pay Review CommitteeReport 2009\Chapter_6_Recommendations_Final.pdf

13 SCALES FOR A+ AND A CATEGORY (E0-E9, DIRECTOR,

CMD), 12 SCALES FOR B CATEGORY, 11 SCALES FOR CCATEGORY AND 9 SCALES FOR D CATEGORY B: FITMENT Public Sector Pay Review Committee Report

2009\Chapter_6_Recommendations_Final.pdf INCREMENT: ANNUAL INCREMENTS 2%-4% DEPENDING

UPON PERFORMANCE APPRAISAL AND CAPACITY TO PAY.

MAXIMUM 3 STAGNATION INCREMENTS FOR EVERY 2 YEARSAT 2% OF BASIC PAY SUBJECT TO PERFORMANCE RATINGGOOD

DA: AICPI 2001=100, WHICH IS 126.33 AS ON 1.1.2007
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RECOMMENDATIONS

(HRA)CITIES WITHPOPULATION

RATES OF HRA

50 LAKH AND ABOVE 30% OF BASIC PAY

5 TO 50 LAKHS 20%OF BASIC PAY

LESS THAN 5 LAKHS 10% OF BASIC PAY


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RECOMMENDATIONS

CCA: ABOLISHED OTHER ALLOWANCES AND PERKS: SUBJECT TO A MAXIMUM OF 50% OF

BASIC PAY WITHOUT THE ELEMENT OF RISK PAY: WHERE CPSEs HAVECREATED INFRASTRUCTURE SUCH AS HOSPITALS, COLLEGES, SCHOOLS,CLUBS ETC. THESE FACILITIES SHOULD BE MONETIZED AT REPLACEMENT

COST FOR THE PURPOSE OF COMPUTING THE PERKS AND ALLOWANCES. THE FOLLOWING ALLOWANCES WILL BE OUTSIDE THE PURVIEW OF 50%

LIMIT. NORTH EAST ALLOWANCE LIMITED TO 12.5% OF BASIC PAY. ALLOWANCE FOR UNDERGROUND MINES LIMITED TO 15% OF BASIC

PAY. SPECIAL ALLOWANCE FOR SERVING IN THE DIFFICULT AND FAR

FLUNG AREAS AS APPROVED BY CONCERNED MINISTRIES INCONSULTATION WITH DPE FROM TIME TO TIME UP TO 10% OF BASICPAY.

NON-PRACTICING ALLOWANCE FOR MEDICAL OFFICERS LIMITED TO25% OF BASIC PAY.

CAFETARIA APPROACH: CHOOSE FROM A SET OF PERKS AND ALLOWANCES


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RECOMMENDATIONS RELATING TOPERFORMANCE RELATED PAY

(PRP) PRP TO BECOME MAJOR COMPONENT OF

EXECUTIVE COMPENSATION

PRP TO BE LINKED WITH COMPANY AND

INDIVIDUAL PERFORMANCE (IDENTIFY KEYRESULT AREAS)

10 TO 25% OF PRP TO BE IN THE FORM OF ESOP.

PERCENTAGE CEILING ON PRP, TO BE EXPRESSED

AS PERCENTAGE OF PAY, TO BE PROGRESSIVELYINCREASED FROM JUNIOR TO SENIOR LEVELEXECUTIVES WITH SPECIFIC REFERENCE TOCATEGORY OF CPSE AS BELOW:


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PRP AS PERCENTAGE OF

SALARYGRADE A+, A AND B

CATEGORIESC AND DCATEGORIES

E0 to E1 40 40

E2 TO E3 40 40

E4 TO E5 50 50

E6 TO E7 60 60E8 TO E9 70 70

E10 100 -

DIRECTOR 150 100

CMD 200 150


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STOCK OPTIONS IN CPSE

STOCK OPTIONS PARTICIPATION IN OWNERSHIP

SHARES IN COMPANY WHERE EMPLOYEE WORKS SHARES IN OTHER COMPANIES

DIVIDEND BENEFITS

APPRECIATION OF EMPLOYEE OWNED CAPITAL

EMPLOYEE STOCK OPTION PLANS (ESOPs) MOST COMMONLY USED FORM FOR EMPLOYEE OWNERSHIP CAME INTO BEING AS A RESULT OF TIGHTENING LABOR MARKET FOR

KNPWLEDGE WORKERS THROUGH ISSUE OF FRESH EQUITY RESULTING IN DILUTION OF STAKE HOLDER

SHARES AND AN ALTERATION IN THE COMPANY EQUITY STRUCTURE

THROUGH THE FORMATION OF A TRUST , WHICH BUYS COMPANY EQUITY FROMTHE OPEN MARKET FOR OFFERING OPTIONS TO THE EMPLOYEES AS PER THECOMPANY POLICY.

EMPLOYEE STOCK PURCHASE PLAN (ESPP) STOCK INDEXED PLAN

STOCK APPRECIATION RIGHTS (SARs) PHANTOM STOCKS


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ESPP

Under an employee stock purchase plan,stock is transferred to employees, usually ata discount to the market price. Under thisscheme, full rights may be conditional andpredicated on the occurrence of certainevents e.g. continued employment and/ orachievement of certain business measures.

During the restricted period, the employeeenjoys full share-holder rights, except forthe right to sell or transfer the shares.


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STOCK INDEXED PLAN

DOES NOT INVOLVE ACTUAL PURCHASE AND ACQUISITIONOF SHARES.

EXPENSES NCURRED UNDER THE PLAN ARE TREATED ASTAX-DEDUCTIBLE COMPENSATION EXPENSE.

THREE MOST IMPORTANT FEATURES OF THIS PROGRAMARE THEY ONLY REWARD MANAGERS WHO OUTPERFORM

THE MARKET BECAUSE THE STRIKE PRICE IS NOT FIXED AND TENDS

TO RISE EVERY YEAR, AN INDEXED PLAN WILL

TRANSFER LESS VALUETHAN A CONVENTIONAL STOCKPLAN INDEXED PLAN HAVE LOWER STRIKE PRICES AND

HIGHER VALUES EVEN IN BAD TIMES MAKING IT EASIERTO RETAIN VALUABLE EMPLOYEES JUST WHEN THEY ARENEEDED MOST.


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STOCK INDEXED PLAN

STOCK APPRECIATION RIGHTS (SARs) SARs provide employees with cash payments equal to the

appreciation of the companys stock over a specified duration.Thus, unlike other options, SARs provide employees with equityupside without exposure to any downside. Also, options, SARs

result in periodic payments of cash to the employees over theSARs life. These are subject to same accounting treatment asindex options and, therefore, are avoided by managers.

PHANTOM STOCKS Phantom stock is simply a promise to pay a bonus in the form of

the equivalent of either the value of company shares or theincrease in that value over a period of time. Phantom stock is aform of long-term deferred compensation using the companystock as the measuring device for calculating the value of thedeferred compensation. It simulates the company stocks ineverything except that does not represent true ownership. Thecompany simply credits these phantom shares on its books andas the value of the company stock rises and falls, so does thevalue of the phantom stock.


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THANKS

determination of salaries in cpses

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