Recommendations of VIIth CPC:Suggestions for Performance linked Incentive Schemes


The  VII CPC has examined the status of performance related incentive schemes presently in practise on basis of recommendations of the VIth CPC in Chapter 15 of the report and made certain important suggestions.

Tracing the evolution of such incentives it has referred to the report of 2nd Administrative Reforms Commission which had visualised such incentives as a prerequisite for an effective governance system. The issue was taken up by Vth and VIth CPC as a tool for providing incentive for effective Administration.The Scheme formulated by VI CPC covered organisations as well as individuals.

The previous Pay Commission had made the implementation of  the Scheme optional for the various units after taking into consideration the difference in functional scope of various units of Government. The implementing Departments had to draw a roadmap of activities and harmonise the same with individual achievements. It had added the condition of Departments having prepared a Results Framework Document (RFD) for two preceding years, and also several additional measures such as developing IT based attendance and performance monitoring systems.

The recommendations had failed to make  major impact in face of difficulties in making requisite budgetary provisions, absence of clear performance evaluation parameters and aberrations such as high achievers caught in mediocre environments. The Commission has also noted the failure of earlier schemes of Performance Linked Bonus (PLB) conceived for Govt. Servants due to absence of clear, quantifiable targets and performance evaluation of any individual.

The Commission in it’s report has pointed out that in public services the objectives are not quantifiable in monetary terms like private sector organisations.The task of laying down the parameters for performance evaluation and reward for different services and Government Departments is therefore rather complex. However there are precedents in other countries where such schemes for incentivising good performers through objective criteria have been implemented with success. Some countries have evolved separate set of norms for senior civil servants and junior functionaries.

Considering all factors the CPC has observed that exercise for evolving a system for performance based rewards should be preceded by proper understanding of the system, adequate planning and capacity building at various levels.The vagaries of Govt.functions makes it impossible to devise a common performance based incentive Scheme. The Commission has suggested simple and effective schemes which should have common features for the Department. It has been suggested that the reward system should be an annual feature and should not be linked to savings effected by the employee.

In conclusion the Commission has recommended introduction of Performance Related Pay for all categories of Central Government employees, based on quality RFDs, reformed Annual Performance Appraisal Reports and broad Guidelines.The Performance Related Pay 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.In the interim period the Ministries and Departments can review the existing Bonus Schemes and create linkage  with increased profitability/productivity with definite parameters.

Another important suggestion made by the CPC pertains to weightage to be given for in the APAR to personal attributes of the public servant in comparison to his performance in achievement of results.The Commission feels that it should be in ration of 40:60 instead of current  ratio of 60:40.

It has also strongly pleaded for fixation of definite time frame for drafting, reviewing and finalising  RFDs .It would also be necessary that these timelines get synchronised with the preparation of the APAR ..”so that the targets set under RFD get reflected in individual APARs in a seamless manner.”


Seventh CPC :Army and MNS Recommendations

The recommendations for Armed Forces are based on approach similar to that adopted for civilian employees as spelt out in previous posts.The  Pay Bands and Grade pay have been done away and fitment factor of 2.57 has been applied to all categories.The entry pay to a category (except for MNS) is arrived at by calculating minimum of pay band and accounting for subsequent increments earned in the pay band (except for the rank of Brigadier where fitment table notified by the Ministry of Defence through its Special Army Instructions of October 2008.)

Like civilian pay scales the Commission has, for deciding entry pay at various stages, proposed index of rationalisation to account for higher degrees of responsibility and accountability at various levels .While this is  fixed as 2.57 for PB  -1 it rises  steadily climbing to to 2.81 for Service Chiefs .Index of 2.57 applies also to the officers in the rank of Colonel and Brigadier and their equivalent.

The starting pay in existing pay structure is ₹8,460 Sepoy (and equivalent), Under the recommendations the pay of entry level personnel in the defence forces, has been fixed in the Defence Pay Matrix at ₹21,700. Fixation of pay will follow the same principle as that for a regular promotion in the pay matrix.

The Commission has not recommended any increase in the number of MACPs. which is presently pegged at 8, 16 and 24 years .

The Commission has maintained pay parity in civilian and defence personnel at matching levels .Group `A’ entry level is identical at ₹56,100 in the case of both civilian and defence service officers. Similarly the pay of the Major General and Joint Secretary and equivalent officers and those above [viz., Lieutenant General (in HAG, HAG+, Apex) and Chief of each defence service] has been kept identical with their civilian counterparts. Identical pay levels has been devised for JCO/ORs and their civilian counterparts corresponding to the existing pay bands and grade pay.

For defence forces personnel, there are two separate matrices, one for the Service Officers and JCO/ORs and another for the Military Nursing Officers. The Pay Matrix designed for the Defence Forces personnel is more compact than the Civil pay matrix keeping in view the number of levels, age and retirement profile of the service personnel.

Defence Pay Matrix

The Commission has further clarified that the pay structure designed by it for the defence forces personnel has been done keeping in view (a) some of the aspects in their rank structure unique to them and (b) pay structure is not intended to determine the status of the personnel vis-à-vis their counterparts on the civil side.

In the design of the Pay Matrix for Military Nursing Service (MNS) , the Commission has kept in view the approach followed by previous Pay Commissions and traditional relativities between the Armed Forces Officers and Military Nursing Service Officers. In particular the pay scales/grade pay based on the V and VI CPC Reports were kept in view.

While deciding the level of minimum pay fro MNS the following formula has been adopted:Minimum Pay for a Rank in MNS= (Minimum Pay for that Rank in Defence Pay Matrix) x (Grade Pay of the Rank in MNS)/(Grade Pay of that Rank in the Services).The pay Matrix for MNS thus conceived is as below :

Pay MAtrix MNS

Following exceptions have  been made for purposes of rationalising the pay structure:

  1. In the case of Captains, the Commission has moderated the minimum pay level upwards to ₹59,00017, to avoid bunching of minimum pay of MNS Lieutenant and Captain.

  2. In the case of Brigadiers some moderation downwards from the figure arrived at by the formula (₹1,26,800) has been effected to provide suitable differential in the minimum of the pay level between Brigadier and Major General of MNS. Hence the mid-point of the minimum of the pay levels of Colonel and Major General viz., ₹1,19,700 has been taken as the minimum pay for the Brigadier of MNS.

For Military Service Pay the Commission has recommended an MSP for the four categories of Defence forces personnel at ₹15,500 for the Service Officers, ₹10,800 for Nursing Officers, ₹5,200 for JCO/ORs, and ₹3,600 for Non Combatants (Enrolled) in the Air Force per month. MSP will continue to be reckoned as Basic Pay for purposes of Dearness Allowance, as also in the computation of pension but will  not be counted for purposes of House Rent Allowance, Composite Transfer Grant and Annual Increment.

For calculations in individual cases the procedure as outlined in previous post can be followed.The Report of CPC is also included in this blog on the “REPORTS” pages.In case of difficulty in viewing the pay matrix  original can be viewed on page 89 & 91 of the report.


Seventh CPC: Approach for simplification and rationalisation

The Seventh CPC like other Pay Commissions had been entrusted with the responsibility of evolving pay structures which were rational and simple.It was expected that the pay packages offered should be able to attract best talent in civil and defence services and also be capable of ensuring  performance related efficiency while taking note of  the existing socio political setup in the country.The pay structure should ensure value addition to services by talent of individual employees.

While discussing the pay structure for civilian employees the report explains the evolution of compression ratio to present level.Compression ratio is the ratio between the lowest pay  and the highest salary drawn by Secretary to Govt. of India in the pay structure.At the time of first CPC the ratio was 1:36.4(min Salary of ₹ 55 against highest of ₹ 2000.) .This came down to 1:11.4 in sixth CPC (min Salary of ₹ 7000 against highest of ₹ 80000).

There were several innovations brought about by  VI CPC which included running pay bands for both Civilians as well as Defence forces as well as  the introduction of the concept of Grade Pay as a level differentiator besides  calculation of the annual increment on percentage basis.Sixth CPC had also recommended abolition of Gr.D category posts by elevation of present incumbents to Gr.C by skill upgradation.It reduced 35 pay scales of Vth CPC to 23 (19 Pay bands +4 fixed pay levels).

However the Seventh CPC was confronted by stakeholders with several inconsistencies in Pay bands and Grade Pay structures and anomalies in Entry pay  recommended by Sixth CPC at various level . This  scenario had lead to demand for a fitment factor which may cover all cases in equitable fashion.

The recommendations of Seventh CPC are for abolishing the system of Pay Bands and Grade Pay and creation of  new functional levels  by merging the grade pay with the pay in the pay band. Commission said that it has ensured that all of the existing levels have been subsumed in the new structure; and no new level has been introduced nor has any existing level been dispensed with.The Seventh CPC has recommended a Pay matrix with distinct Pay Levels. The Level would henceforth be the status determiner as per table given below:

Pay Levels as per Pay Matrix

The Commission  has pointed out that  with this methodology of pay fixation “..any new entrant to a service would wish to be able to make a reasonable and informed assessment of how his/her career path would traverse and how the emoluments will progress alongside. The new pay structure has been devised in the form of a pay matrix to provide complete transparency regarding pay progression.”

In addition to the pay matrix the CPC has also applied concept of rationalisation of entry pay to take care of uneven pattern of  a jumps in the career hierarchy under existing pay scales in the Government of India. This system is based on the premise that with enhancement of levels from Pay Band 1 to 2, 2 to 3 and onwards, the role, responsibility and accountability increases at each step in the hierarchy.

Rationalistion table.png

The  pay matrix as suggested by CPC is intended to  replace  existing system of Pay Bands and Grade Pay.The pay matrix comprises of two dimensions. ” It has a “horizontal range” in which each level corresponds to a ‘functional role in the hierarchy’ and has been assigned the numbers 1, 2, and 3 and so on till 18. The “vertical range” for each level denotes ‘pay progression’ within that level. These indicate the steps of annual financial progression of three percent within each level.”

The Commission has devised the pay matrix by calculating the sum of Basic pay and Grade Pay at various stages and multiplying the sames of  by a multiplication factor of 2.57 . While devising the pay matrix the entry pay has been calculated by adopting different multiplication factors (shown as index in table below) for different pay bands depending on respective functional responsibilities.Pay Matrix is given below.

Pay Matrix

Pay Matrix 2

The following methodology has been suggested for fitment:

“The fitment of each employee in the new pay matrix is proposed to be done by multiplying his/her basic pay on the date of implementation by a factor of 2.57. The figure so arrived at is to be located in the new pay matrix, in the level that corresponds to the employee’s grade pay on the date of implementation, except in cases where the Commission has recommended a change in the existing grade pay. If the identical figure is not available in the given level, the next higher figure closest to it would be the new pay of the concerned employee. “

The CPC report has given some working examples for calculation.Having had a brief insight into Civilian Pay Scales we shall take up Army Pay Scales shortly.


Sixth CPC Report:(vi) Sample Calculations

As per promise some calculations are attempted below in respect of employees & officers covered under various categories. Calculations are based on the assumption that any advance increment would not be available at the time of pay fixation,.In other words the minimum benefits have been calculted. The calculations are for pay only. Employees will also get other benefits which would be dealt with in susequent posts. Any errors may kindly be notified.Calculations are based on old DA Rates and may be subject to change if new rates effective wef 1/1/06 are applied.(Also there is a typographical  error in Col.4 Row 11.Please  read 1/1/07 in place of 1/1/06)

(i) The Top Brass



(ii ) The Middle Order



(iii) The Gangadeens


Sixth CPC Report:(v) Calculation of benefit in pay

The uppermost question in everyone’s mind is about the quantum of benefit which would accrue for respective categories of staff. As a starting point the increase in basic pay and arrears payable based on that may be discussed. The final benefits would be subject to approvals and modification by the Government.

A number of calculators are already available on the net and calculations made by them by and large approximate to the expected benefits. However a step by step calculation is attempted here for understanding the process.

For this exercise the following issues can be taken as settled:-


(i) The benefit would be admissible from 1st Jan. 2006 . Whether the whole amount is paid in cash or is transferred to savings would be subject to decision by the Central Govt.

(ii) The rate of dearness allowance payable (on date of pay fixation ) shall be equal to the difference between the rate of DA on 1st Jan. 2006 (24%) and rate as admissible on date of pay fixation. DA as on date is admissible @ 47% . The difference as on date is 47-24=23%

(Warning :Subsequent comments on this post indicate that this assumption may not be correct and a new formula based on a new index may be adopted, which will reduce the quantum of benefits)



(iii) The dearness allowance under the new scales shall be payable on basic pay +grade pay .

(iv) Arrears shall be calculated taking into account six monthly increases in DA for the intervening period as shown in the table above.


(v) The report visualizes accrual of increment on 1st July 2006 , 2007 & 2008 and one increment should accrue due to pay fixation from 01/01/06. Therefore minimum of three increments (=7.5% of basic pay as fixed on 1st Jan 2006) would have become due at the time of pay fixation.

(vi) Since increments are to be released @2.5% of the basic pay annually ,an increase of 7.5% (three increments) may be expected due to accrual of increments at the time of pay fixation.

(vii) For the purpose of pay fixation the calculations are to be made by cross matching the basic pay being drawn with the pay and grade pay which would now be admissible with the help of table 2.2.2 shown at page 54 -70 Chapter 2 of the Report of Sixth CPC .

An illustration may be considered.

Let us consider the case of an officer in the pay scale of Rs.14300-18300 /- who is having basic pay of Rs.15500 /- at present. On 01/01/06 his basic pay would be Rs. 14700 /-. The table applicable to officers in the scale of Rs. 14300-18300 /-corresponds to Pay Band PB-3 which covers Gr. A Services of this category .



Salary under the old Pay Scales:Since at present the officer would be drawing basic pay of Rs.15500/-.Dearness Allowance calculated @47% on (Basic pay + Dearness Pay) would be payable . DA thus calculated is Rs10927/-.

Total pay on 01/01/08 under old Scale would be (15500+7750+10927)= Rs 34177/-

Salary under the new Pay scale:

As per the above table on 1st Jan.2006.the officer would be entitled to basic pay of Rs. 25580/- and grade pay of Rs. 7600/-in the new scale which would total to Rs 33180/- Increments @ 2.5% (Rs. 830/-)each would be due on 1st Jan. 2006 ( for pay fixation) , 1st July 2006 & 1st July 2007 .

Pay hike due to increase in rates of DA shall be @ 5% wef 1st July 2006 , @6% wef 1st Jan 2007, @ 6% wef 1st July 2007 and 6% wef 1st Jan 2008, Totaling to 23% on date.The following increase may be assumed in the pay of the employee

(i)Basic Pay + grade pay in new scale as on 01/01/06 =Rs. 33180/-

(ii) Adding three increments @ 7.5% (Rs.830/- eachX3)=Rs. 2490

(iii) Pay after adding increments =Rs. 36670/-

(iv) Increase in DA as payable @ 23% =Rs.8434/-

(v) Total Pay on Date in new Scale of Pay = Rs.45104/-

The monthly increase is coming in the range of Rs. 11000/- per month which appears to be a bit unrealistic. If any corrections are suggested, the same would be welcome. At this rate the arrears payable may be in the range of{ Rs.8000/- (average. diff in pay) X 30} which accounts for intervening two and half years.

(If we take only two increments in this period then the jump as on date may be in the range of Rs.9000/- pm only and average increase may be Rs.6500/- pm). Those desiring exact amount of arrears may wait for some time till reliable calculators are available on the net.

Alternatively by following the above method and calculating increase based on six monthly increase in DA and annual increment in pay details can be worked out .

Some Exceptions

(i) Promotion or change of Scale of Pay between 01/01/06 and fixation of new pay

Such employees would be allowed choice of refixation of pay from the date of subsequent change in the scales of pay and would get benefit of matching pay & grade pay.

(ii) Cases of new recruitments: Pay & Grade Pay of such employees shall be fixed at the lowest pay and grade pay in the corresponding pay band. However they will get benefits of increments. For calculating the number of increments the number of years required to move from the entry grade post in the pay band to the stage of pay in the recruitment scale shall be calculated as per DOPT OM Dt. 25/5/98 (or any amended instructions applicable on the date).Number of increments shall be equal to number of such years . (If it is a bit confusing pg.52 of Chapter 2 in the report may be accessed.)

Next post : Sample calculations for Gr. B,C & D employees.

Sixth CPC Report:(ii) Benefits for All India Services

Chapter 3.2 of the Report deals with All India Services. The three All India Services namely Indian Administrative Service (IAS) , Indian Police Service (IPS) and Indian Forest Service (IFS) owe their origin to the mandate given to the Parliament under Article 312 of the Constitution. The recruitments for IAS & IPS are made by UPSC based on competitive examinations held annually. The Recruitment for IFS is made through separate All India Examination. The Commission’s report has given due appreciation to the importance of All India Services and observed that innovative measures are necessary for ensuring that these services are able to deliver to the best possible extent.

The Commission has observed that the supremacy of IAS over the other All India Services has to continue as per the trend which started from the times when the First Central Pay Commission submitted it’s report. It has noted that the Fifth CPC had also held the same views in this context. While coming to this conclusion it has taken note of the wide ranging exposure to challenging assignments that the officers of this service experience over their career.

Regarding the competition with private sector salaries the Commission’s observations are that despite the difference in pay package the IAS due to it’s unique status in the scheme of governance continues to draw the best talents. A large number of young men and women who join the service are professionally qualified and have in many cases given up economically rewarding jobs to join IAS because of the challenges and prestige attached to the service. The IAS officers have been given an edge in the pay scales at the entry stage in view of the tough and challenging atmosphere that they have to encounter from the initial stage of service. The edge given by the Fifth CPC in different pay scales had in monetary terms ranged from Rs.650/- to Rs.800/-. In the recommendations for the Sixth CPC the grade pays recommended for IAS have been made slightly higher in comparison to grade pay for other services by Rs.400/- for Senior Time Scale, Rs. 900/- for Junior Administrative Grade and Rs. 700/- for NFSG (Non functional Selection Grade). The benefit would continue throughout their career due to proposed nature of pay scales known as pay bands.

For the Indian Police Service a major recommendation is for up gradation of posts of Director Generals (DGs) in all the five Central Para Military Forces (CPMFs) to revised scale of Rs. 80000/-. The Commission feels that this step would ensure continuity in the Services and create an atmosphere conducive to planning for long term reforms in these forces . For the Indian Forest Service (IFS) up gradation of similar nature has been recommended for the Post of Director of Indira Gandhi National Forest Academy (IGNFA).

The most popular demand raised by the IPS was for removal of the post of DIG which is covered by Super Time Scale of Rs.16400/-.Commission noted that the post of DIG is a functional post in most of the States as well as in CPMFs. In several States the range is headed by DIG. It has recommended that the post be continued. The officers in the Forest Service had made a similar demand for the Post of Conservator of Forests. The demand has been found unacceptable on similar grounds. Commission has also recommended that the relative hierarchical structure recommended by the previous CPC should continue in the IFS.