Bonus Schemes in the Central Government

Bonus Schemes in the Central Government

Bonus Schemes for Central Government Employees – 7th Central Pay Commission Report

Apart from DAE/DoS, there are bonus payments to Group `B’ (non-gazetted) and Group `C’ Central Government employees. The bulk of these employees are covered under the Productivity Linked Bonus (PLB) Scheme, which is implemented in Railways, Posts and Telecommunications, production units under the Ministry of Defence and other establishments.

The functioning of the PLB Scheme was reviewed in 1982-83 by a Group of officers. The Group of officers also considered the demands for grant of bonus made by those Central Government employees who were not covered by the PLB Scheme. The Group suggested evolution of a productivity linked bonus scheme for Central Government employees as a whole. Based on the recommendations of the Group, and pending evolution of a single scheme of bonus for employees, an Adhoc Bonus Scheme was evolved and the remaining employees, who were not covered by the PLB Scheme, were allowed ex-gratia payment. The Commission notes that the financial outgo on these two bonus schemes stood at ₹1847.08 crore for the year 2013-14.

These Bonus schemes have no clear, quantifiable targets and performance evaluation of any individual, therefore, is not possible in an objective fashion. The Commission notes that Ministry of Finance has been insisting on revision of the PLB Scheme. It has been suggested, inter-alia, that the PLB scheme should be on the basis of an input-output ratio, should be based on productivity and profitability and that productivity should be assessed on financial parameters based on profitability of the organisation.

The VI CPC too had recommended that all departments should ultimately replace the existing PLB Schemes with PRIS. The VI CPC further opined that in places where PLB is applicable and it is not found feasible to implement PRIS immediately, the existing PLB schemes may be continued in a modified manner where the formula for computing the bonus has a direct nexus with the increased profitability/productivity under well-defined financial parameters

The Commission notes that since PRIS could not be implemented, it could not supplant the existing system of Performance Linked and Adhoc Bonus Schemes.

Analysis

Pay flexibility reforms are not a silver bullet, and involve trade-offs and risks. A study of the literature on the subject reveals that employee motivation and performance are not exclusively linked to Performance Related Pay (PRP) which may only enforce temporary compliance.

The Commission notes that it may be relatively easier to implement PRP in private sector organizations which are, generally speaking, guided by profit motives. Targets, thus, are often based on quantitative criteria making the assessment of performances easier. In the governmental context, on the other hand, the targets are more in the nature of social and public goods. These may not necessarily be tangible and discernible within a stipulated period. Proportioning credit for such a larger public good amongst various departments may not be possible so as to reward some and leave out others. There may be genuine difficulties in separating individuals from the collective, in terms of contribution made towards achieving results. The problem of PRP degenerating into routine entitlements also needs to be reckoned with.

Despite the potential difficulties with PRP, recognition for good effort and achievement through an incentive can, over time, energize the bureaucratic culture of the civil service into one that is focused on meeting citizens’ and the government’s expectations for speedy and efficient delivery of services.