A never-ending spree

Just how much control do bureaucrats exercise over their so-called political masters? Quite a lot, it turns out — especially over things they see as impacting their own, immediate welfare.

Take the deafening silence over the constitution of the Seventh Pay Commission, one of the parting ‘gifts’ of the UPA government for whichever government comes next. Earlier this month, Prime Minister Manmohan Singh, a former bureaucrat himself, signed the order constituting the Seventh Pay Commission.

The Commission will be chaired by retired Supreme Court judge Ashok Kumar Mathur and has been asked to recommend the extent to which the salaries and benefits of more than 70 lakh Central Government employees and pensioners. The commission’s award is slated to kick in from 2016, ten years after the last one.

Going by the kind of ticking time bombs lobbed into the lap of the next finance minister, including a slowing economy, reduced revenue growth, soaring non-Plan expenditure, and a major — and permanent — diversion of central funds to states for implementation of most of the government’s welfare schemes, this might seem like small beer.

But nevertheless, given the scale and size of the potential outgo, there has been practically no noise over this. Which is quite astonishing, since the previous Pay Commission has so far cost the central government over ₹2 lakh crore, the Railways and additional ₹1 lakh crore and state governments, local governments and public sector undertakings probably more than this, thanks to me-too demands from their staff.

This is because, regardless of the colour of the political dispensation in power at the Centre, pay and perks of government employees — a significant vote bank by themselves — have been a taboo topic for political debate. If at all any noise is made, it is almost always in support of the demand for better pay and perks for government workers.

It is no different this time around either. Even the Aam Aadmi Party, the most vocal advocate for accountability among public servants, has kept quiet about it.

This may, of course, be because the AAP’s definition of accountability is fixated on just one parameter, corruption. No political party has seriously taken up the issue of another key parameter, which anybody else who works for a living, including, ironically, politicians themselves, takes for granted — performance.

Although the Sixth Pay Commission had mandated certain performance-linked parameters, and had even stipulated that a fifth of all the increments should be given on the basis of performance and productivity and not merely on the basis of time served, government employees remain the most cosseted part of the working class.

And for people who have no clearly defined productivity targets to deliver on, and are further protected by statute and law from the most basic of risks run by every other type of employee — that of getting fired — government employees have had a pretty good time of it.

Every successive pay panel has roughly tripled pay. This means that simply by turning up for work for 10 years, a government employee would have tripled his pay. This, by any yardstick, is far better than what their counterparts in the private sector have been able to achieve.

Take for the sake of illustration, the case of Hindustan Unilever Limited. As a multinational and as India’s largest consumer products company, HUL is considered to be a sought after employer at all levels. From IIM graduates to factory hands, one can safely assume that all HUL employees get, if not the best deal in the market in each and every case, a deal which compares favourably with the best that the market can offer.

Between 2003 and 2013, HUL’s annual reports show that outgo on wages and salaries rose from ₹493.76 crore to ₹1,318.34 crore. This translates to a 2.67 times increase in all wages and salaries. Since HUL’s wage bill is heavily weighted in favour of highly skilled and highly paid white collar employees and managers, one can argue that the average wage of a factory worker in HUL increased by less than 2.67 times over 10 years.

This is actually more or less on par with the increase of 2.6 times effected in the pay of an entry level employee over the past decade, which rises sharply to well over three times in the case of higher pay grades.

However, this is not accompanied by the tough productivity-linked norms that all HUL employees — from factory hands to C-suite honchos — had to meet in order to achieve the same level of increase in pay and benefits.

At higher levels, life gets even better for a babu . One of the key characteristics of any performance-linked compensation system is the percentage of ‘pay-at-risk’ to total pay.

Pay-at-risk the component which the employee stands to lose if she or he does not meet mutually agreed performance and delivery goals during the review period.

Indians as a rule are very risk averse when it comes to remunerations, and HR managers have been finding it difficult to increase the component of variable pay and pay-at-risk in the total pay package to levels comparable to developed economies. Nevertheless, according to consultancy Aon Hewitt, pay-at-risk ratios have risen sharply over the past decade in India as well.

The industry average is now over 10 per cent at the entry level, over 15 per cent at junior-to-middle levels and rising to nearly 25 per cent at senior management levels. At C-suite levels, the pay at risk ratio rises to over 40 per cent of total pay.

In contrast, government employees have very little skin in the game when it comes to performance. The biggest risk is the higher level of increment.

This means that a government employee who performs will get a 3.5 per cent increment, in contrast to a time-scale 2.5 per cent garnered by a non-performer!

This is ridiculous. The need for a ‘living wage’ — the guiding principle for the first Pay Commission — is long past. It is time government employees are asked the same tough question that all other working Joes get asked at appraisal time — what have you delivered?