Commensurate with the status of the high offices that they hold, the government recently announced a doubling of the salaries of the President and vice-president, and increasing emoluments for governors. The last pay hike for dignitaries holding the highest constitutional posts was in 1996. This has triggered a debate where many feel that the exercise of power and the opportunity to shape the nation?s destiny should transcend considerations of financial reward.
A look around the world, however, shows that the increase is justified. In recent times, salaries of presidents and prime ministers have shown massive increases. In France, president Nicolas Sarkozy?s salary was recently doubled to 240,000 euros a year ($346,000) following a vote in Parliament a few months after he assumed office. When Gordon Brown took over from Tony Blair as the British prime minister, he got an overnight raise of about $100,000 bringing his salary to $375,222 and making him one of Europe?s highest-paid prime ministers.
The US taxpayer gives President Bush $400,000 a year and the German chancellor is paid around $318,000. Singapore?s premier, who, following a controversial round of pay increases, is set to receive $2.05 million. The rationale for the increase was, as the Hay Group found in its research, the need to keep government salaries competitive.
Compared to not only these democracies but also the salaries of cabinet ministers and members of parliament in India, the pay hikes of the constitutional dignitaries can at best be termed miniscule. The President will now draw a salary of Rs 12 lakh a year ($30,770), the vice-president would get Rs 9.60 lakh ($24,615) and governors Rs 9 lakh ($23,077). A cabinet minister draws Rs 7.80 lakh ($20,000) and an MP Rs 8.16 lakh ($20,923).
Another justification for the hike lies in the fact that other officials get regular increases through the dearness allowance component and they could wind up making more than the President. At a different level, the low presidential salary could hold down other top civil service salaries. This could create recruiting problems because talented people make more money in the private sector.
Whether or not these pay hikes would serve as a benchmark for the Sixth Pay Commission is a question that has no easy answers. The stock markets are booming, the economy is doing well and foreign investors are eager to set up shop in India. Trade unions and government employees? associations would be tempted ask why their own salaries should not match skyrocketing wages in the private sector.
With the Fifth Pay Commission?s call over ten years ago to downsize government by a third not taking place, the task of the current commission becomes onerous. Eminent economist and member of the last pay commission Suresh Tendulkar notes that while it is necessary to pay better salaries at higher levels, to do so, the number of posts at such levels need to be reduced. Only then could the numbers below be reduced.
One possible solution, widely used in the private sector, is to bring in performance-related pay (PRP), where a variable part of pay is awarded depending on performance. Many OECD countries have had PRP for decades. PRP can foster individual motivation at the senior level and help compete effectively with the private sector for talented employees. The government could use PRP as a way of containing the wage bill by reducing automatic progression through salary levels and refuting the common perception that civil servants are unaccountable and overpaid by demonstrating that their performance is monitored.
The one note of caution to be borne in mind is the objectivity in rating performance. Measuring performance through performance appraisals is a difficult process. The tendency is to rate the maximum number of civil servants as ?fully satisfactory? or better. The emerging trends are to distinguish between top and bad performers, and by using quota systems and forced ranking systems to specify the proportion of employees placed in higher categories. The Sixth Pay Commission has, therefore, assigned a study to IIM-Ahmedabad to examine the feasibility of PRP in government?a step in the right direction.
The author is secretary-general, CUTS International, Jaipur