8th Pay Commission: Possible to compare Govt and private sector salaries? Insights from 6th CPC

Disparity between private sector salaries and salaries in the Government has often been brought up before the pay commissions in the past. However, pay commissions have always taken a different view on this issue.

A discussion on this issue in the 6th Pay Commission's report offers an insight into why the comparison of government and private sector pay scales may not be appropriate.

The 6th CPC noted mere comparison of the pay or pay scale without taking cognizance of the total package of allowances and benefits available within the Government may not be appropriate, especially as the value of pension granted by the Government and the value of job security provided cannot be undermined since they form major components of the total package.

"The Government provides unparalleled variety and job content, along with a much wider canvas of operation than in the private sector. The prestige involved in working for the Government and the opportunity of making a contribution to national policy or its implementation are other aspects which add an unquantifiable value to Government jobs," it said.

Salary package comparison

The 6th CPC noted that the overall package offered in the private sector is worked out on a cost to company (CTC) basis, quantifying most of the benefits to employees. In order to enable an appreciation of the total package of benefits available to Government employees, a study for estimating the total compensation package for Government employees and cost to the Government was assigned to XLRI, Jamshedpur.

"During presentations before the Commission, it emerged that while the compensation provided by the Government is higher at Group C and D levels, private sector compensation packages are marginally higher for employees comparable to Group B employees and substantially higher for posts comparable to Group A officers in the Government," the 6th CPC said.

"Apart from quantifying the value of pension and other benefits of Government employees, the study has also brought out that the ‘job security’ offered by the Government has immense value that cannot be easily quantified and a quantification will only serve to underestimate the advantage it offer," it added.

CTC doesn't reflect take-home pay

The 6th CPC highlighted that in the private sector, the Cost To Company (CTC) may not actually be a reflection of the take-home pay, as a major proportion of the CTC consists of variable pay which is based on performance.

"Further, the high starting salaries projected in the media and other reports are granted only to a miniscule number who are the best students of top-end management schools and at times, are not reflective of the industry average. Similarly, grant of extremely high pay packages in certain sectors may be a result of the demand for talent at the time of initial setting up of an industry or during the boom period."

"Such episodic events should not be used as the yardstick for comparison, as ultimately the higher salaries in these sectors get normalized over time.

Comparison not possible

Th 6th CPC said, "the Commission is also of the view that the main consideration in the private sector being ‘profit’, an equal comparison with the Government is not going to be ever possible. Central Government employees have been demanding a revision in pay scale revision the private sector."