In a bid to attract and retain talent, the government is planning to hike salaries of top guns in profitable public sector units (PSUs) with their counterparts in the private sector. The sweetener comes with the catch that variable component of their pay packet would be two-thirds of the compensation for the top brass. 

The idea behind the proposal is to align pay packets in line with performance so that the top achievers get the best deals. This is considered a sea change from the current system where pay scales are not too flexible and public sector companies cannot play around with compensation packets in a manner that their corporate counterparts do. 

The responsibility of rewarding achievers would be handled predominantly by independent directors, if current proposals go through. The government plans to direct PSUs to set up a remuneration committee to be headed by an independent director to look into such issues. 

Senior officials said the government is also working on a new sectoral classification for PSUs so that performance standards can be benchmarked on the basis of sectoral realities and remuneration packages are worked out accordingly. 

The officials feel that entry-level salaries in PSUs are at par with private players, but there is a wide gap in the case of top level officials, the difference being 10 times or more in some cases. 

“Some of these suggestions have been made in the second pay committee report and we are working on them. As of now, the annual increment in a PSU is around 2.5% to 4% of minimum basic pay. To attract and retain the talent, we need to offer better emoluments,” said an official at the department for public enterprises (DPE). 

Recently, DPE decided to increase the weightage of sector-specific performance criterion while assessing annual performance of a PSU. 

Currently, PSUs are classified into five sectors — agriculture, electricity, manufacturing, mining and services. “The idea is to modify it into industry and services and sub-heads under these two categories. This will help to judge a company’s performance vis-a-vis the sector it’s operating in. Some PSUs have raised objections to certain parameters. 

Source Economic Times.