Tuesday, February 19, 2008

Sixth Pay Commission - 40% hike + retire at 62 : The Economic Times

Government officials could expect a hint of their new pay structure in the Budget. Finance minister P Chidambaram is likely to make an indicative announcement with regard to implementation of the Sixth Pay Commission recommendations.

While the actual report may be given later, the commission headed by Justice B N Srikrishna is understood to have conveyed the relevant information to the finance ministry. The government may make an announcement on its intent to implement the recommendations in the Budget, sources said.

This is the last Budget of the UPA government and, politically, it wants to give out the right signals to government employees. The commission was set up by the finance ministry following an announcement by Prime Minister Manmohan Singh.

The Sixth Pay Commission's recommendations are expected to result in a hike of 30-40% in basic salary of central government employees in various categories. In the current fiscal, the outgo on account of pay and allowances for the government — with an employee strength of over 3 lakh — has been pegged at Rs 46,379 crore.

Sources said the recommendations could also include increase in the retirement age of government employees to 62 years from 60. The commission had called senior bureaucrats to give a presentation. A hike in retirement age would help the government in postponing its pension liabilities by two years. However, a final decision on this would be taken at the highest political level. The government had last raised the retirement age in 1998 to 60 from 58 years when the Fifth Pay Commission recommendations were accepted.

In fact, a number of ministries had written to the department of personnel & training (DoPT) about increasing the retirement age for select categories. DoPT forwarded the proposals to the ministry of finance, which in turn asked the Sixth Pay Commission to look into it.

Some of the state governments also understood to be in favour of increase in retirement age. This is because they can suit if the Centre decided to implement the recommendations.

On the other hand, many young civil servants in various ministries are seriously thinking of leaving the government and seek greener pastures in the corporate sector if there is no noticeable increase in their compensation. Some fear that the Commission might end up making some restructure of various components without a significant increase in their salaries.

Besides evolving a comprehensive package including retirement benefits for all government employees excluding RBI officials, the commission is also expected to recommend how to make government organisations more people-friendly and sophisticated. The commission will also advice the government on whether there should be performance linked bonus for employees instead of the present ad hoc bonus scheme. The commission will also assess the impact on central and state government finances if they are to implement the recommendations.