Syllabus: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Context
- The 8th Central Pay Commission (CPC) has been constituted with Justice Ranjana Prakash Desai as Chairperson.
- Other members include Prof. Pulak Ghosh (IIM Bangalore) and Pankaj Jain, IAS, as Member-Secretary.
- The Commission will submit its report within 18 months.
What is a Pay Commission?
- Pay Commissions are created by executive order based on a Cabinet decision.
- Their role is to examine salary structures, retirement benefits, and service conditions of Central government employees, including defence personnel.
- The First CPC was established in 1946.
Terms of Reference (TOR)
- TORs are finalized by the Union Cabinet before each Commission’s work begins.
- The 8th CPC TOR includes:
- Considering economic conditions and need for fiscal prudence.
- Ensuring resources for welfare and development.
- Assessing unfunded pension liabilities under non-contributory schemes.
- Evaluating impact on State finances adopting CPC recommendations.
- Comparing emoluments in public and private sectors and CPSEs.
International Practices
- Until the 1970s, public sector pay aimed at equity by linking with private wages.
- In the 1980s, efficiency became the core principle; in the 1990s, performance and incentives gained prominence.
- Current systems aim to attract and retain talent while containing public expenditure.
- Global standards emphasize clear philosophy, internal equity, external competitiveness, and transparency.
- In India, internal equity is strong, but external competitiveness, especially for top roles, remains weak.
Key Issues and Way Forward
- Entry-level public salaries exceed private counterparts, but senior and specialist roles lag.
- The compression ratio (lowest to highest salary) stands at 1:12.5 as per 7th CPC.
- Perks and job security compensate for lower top-level pay but need revision.
- Training, learning opportunities, and flexible work environments should be integrated into the CPC framework.
- The pension bill for 2025–26 is projected at ₹2.76 lakh crore out of ₹39.44 lakh crore total expenditure.
- Rising pension liabilities must be balanced with welfare priorities and fiscal discipline.
- There is a case for broad-basing future Commissions with finance and HR professionals to improve assessment quality.