7th Pay Commission report: No annual increment for non-performing employees

The Pay panel has also recommended introduction of the Performance Related Pay (PRP) for all categories of central government employees.

New Delhi: Central government employees should not be allowed to earn annual increments if they fail to meet performance criterion, the Seventh Central Pay Commission has recommended even as it sought upgradation of performance benchmark to "very good" from "good" level.

It has also recommended introduction of the Performance Related Pay (PRP) for all categories of central government employees.

There is a widespread perception that increments as well as upward movement in the hierarchy happen as a matter of course. The perception is that grant of Modified Assured Career Progression (MACP), although subject to the employee attaining the laid down threshold of performance, is taken for granted, the panel said.

"This Commission believes that employees who do not meet the laid down performance criterion should not be allowed to earn future annual increments. The Commission is therefore proposing withholding of annual increments in the case of those employees who are not able to meet the benchmark either for MACP or a regular promotion within the first 20 years of their service.

"This will act as a deterrent for complacent and inefficient employees. However, since this is not a penalty, the norms for penal action in disciplinary cases involving withholding increments will not be applicable in such cases. This will be treated as an efficiency bar," it said in the report submitted to the government.

Additionally, for such employees there could be an option to leave service on similar terms and conditions as prescribed for voluntary retirement, the panel said. 

Employees get MACP at 10, 20 and 30 years of service. The panel rejected the demand of raising its frequency.

"There is, however, one significant aspect where this Commission feels that a change is required. This is with regard to the benchmark for performance appraisal for MACP as well as for regular promotion. The Commission recommends that this benchmark, in the interest of improving performance level, be enhanced from 'good' to 'very good'.

"In addition, introduction of more stringent criteria such as clearing of departmental examinations or mandatory training before grant of MACP can also be considered by the government," the Commission recommended.

There are about 47 lakh central government employees.

The Commission feels that PRP for central government employees should provide a credible framework to drive performance across ministries or departments.

"Rather than a new system design, the favoured approach should be an incremental adaptation which can operate within the existing framework of rules with minor changes that can enable smooth implementation and operationalisation of PRP," it suggested.

In this backdrop, the Commission recommends introduction of the Performance Related Pay for all categories of central government employees, based on quality Result Framework Documents, reformed Annual Performance Appraisal Reports and broad guidelines, the panel said.

The Commission recommended that PRP should subsume the existing bonus schemes. The Commission notes that there could be a time lag in implementing PRP by different departments. Till such time, the existing bonus schemes should be reviewed and linked with increased profitability or productivity under well-defined financial parameters, it said.