8th Pay Commission to recommend performance-linked incentives: How 4th to 7th CPCs approached it

Clause C of the recently notified TOR asks the 8th Pay Commission, "To examine the existing schemes of bonus with a view to improving performance and productivity and make recommendations on the general principles, financial parameters, productivity and performance-linked parameters for an appropriate incentive Scheme to reward excellence in productivity and performance."

Earlier, the 6th Pay Commission had also recommended an incentive-based pay, while the 7th Pay Commission emphasized on performance-related pay.

What the 7th CPC's TOR said

The TOR of the 7th Pay Commission also had a similar mandate regarding performance pay. It mandated the 7th CPC, "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."

While the wording of the performance pay proposals in the TORs of both pay commissions is slightly different, the essence remains the same.

How has the concept of performance pay evolved over 4th, 5th and 6th CPCs?

• The 4th recommended variable increments for rewarding better performance.

• The 5th CPC signalled its intent to establish a performance-linked pay component to the civil service pay structure.

• The 6th CPC went further to recommend a framework for Performance Related Incentive Scheme.

What the 7th CPC recommended

7th CPC was of the view that any Performance Related Pay (PRP) for Central Government employees should provide a credible framework to drive performance across ministries/ departments.

"Rather than a new system design, the favoured approach should be an incremental adaptation which can operate within the existing framework of rules with minor changes that can enable smooth implementation and operationalization of PRP," it noted.

The 7th CPC recommended the introduction of the Performance Related Pay for all categories of Central Government employees, based on quality RFDs, reformed APARs and broad Guidelines.

It also recommended that PRP should subsume the existing Bonus schemes. "The Commission notes that there could be a time lag in implementing the Performance Related Pay by different departments. Till such time, the existing Bonus Schemes should be reviewed and linked with increased profitability/productivity under well-defined financial parameters," 7th CPC said in its report.