Pay Panel For Central PSUs Bats For Employee Stock Option Plan To Retain Talent

The third pay revision committee for central public sector enterprises (CPSEs) has recommended that all listed public sector units (PSUs) formulate an employee stock option plan (ESOP) to motivate employees and retain talent. All enterprises should formulate an ESOP and 10-25 percent of the performance related pay (PRP) should be paid as ESOPs, the panel suggested.

“ESOP being a concept beneficial for both CPSEs and its employees, the Department of Public Enterprises (DPE) should elaborate the mechanism in consultation with the authorities concerned to enable introduction of ESOP in listed CPSEs with empowerment to the board or administrative ministry to approve the same,” it said.

The recommendations of the Justice Satish Chandra committee, which are to come into effect from January 1, 2017, will be placed before the Union Cabinet for approval. The committee has also recommended a minimum pay of Rs 30,000 per month for executives and a maximum of Rs 3.7 lakh for chairman and managing directors (CMDs).

If the recommendations are approved by the government, the minimum monthly salary of below board-level executives will increase to Rs 30,000 from Rs 12,600. However, in the case of CMDs, the maximum monthly salary for Schedule A CPSEs will go up to Rs 3.7 lakh from Rs 1.25 lakh.

In the case of Schedule B, C and D CPSEs, the maximum monthly salary will be Rs 3.2 lakh, Rs 2.9 lakh and Rs 2.8 lakh, respectively.

Depending on profits, the PSUs are categorised into different schedules, with highest being Schedule A. There are currently 64 Schedule A, 68 Schedule B, 45 Schedule C and 4 Schedule D CPSEs in the country.

The committee has recommended that the rate of house rent allowance (HRA) will be revised to 27 percent, 18 percent and 9 percent when industrial dearness allowance (IDA) crosses 50 percent, and further revised to 30 percent, 20 percent and 10 percent when IDA crosses 100 percent. This relates to cities categorised in terms of population. The panel recommended no change in the IDA pattern and the 100 percent DA neutralisation shall continue to be applicable.

The revised IDA from January 1, 2017, shall be linked to All India Consumer Price Index (AICPI) (2001=100) series with the base of AICPI as on January 1, 2017, as per the quarterly average of AICPI of September, October and November 2016.

The committee has also suggested that the annual increment be retained at 3 percent of basic pay. It has further recommended that increment on promotion shall continue to be at par with the annual increment rate (3 percent of basic pay).

The panel has recommended no change in the retirement age for CPSE employees.

The panel said 40 percent of PRP will come from 10 percent of a CPSE's incremental profit. Incremental profit is the increase in profit compared to the previous year's.

Profit making CPSEs, which can bear the cost of voluntary retirement scheme (VRS) with their own surplus resources, are allowed to implement the VRS policy by allowing compensation and ex-gratia on the revised pay scales proposed to be effective January 1, 2017.