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Pay panel for listed PSUs bats for employee stock option plan to retain talent

LiveMint logoLiveMint 28-02-2017 PTI

New Delhi: The third pay revision committee for central public sector enterprises (CPSEs) has recommended that all listed PSUs formulate an employee stock option plan (ESOP) to motivate employees and retain talent.

All enterprises should formulate an ESOP and 10-25% of the performance related pay (PRP) should be paid as ESOPs, the panel suggested.

“ESOP being a concept beneficial for both CPSEs and its employees, the Department of Public Enterprises (DPE) should elaborate the mechanism in consultation with the authorities concerned to enable introduction of ESOP in listed CPSEs with empowerment to the board or administrative ministry to approve the same,” it said.

The recommendations of the Justice Satish Chandra committee, which are to come into effect from 1 January 2017, will be placed before the Union cabinet for approval.

The committee has also recommended a minimum pay of Rs30,000 per month for executives and a maximum of Rs3.7 lakh for CMDs.

If the recommendations are approved by the government, the minimum monthly salary of below board-level executives will increase to Rs30,000 from Rs12,600. However, in the case of CMDs, the maximum monthly salary for Schedule A CPSEs will go up to Rs3.7 lakh from Rs1.25 lakh. In the case of Schedule B, C and D CPSEs, the maximum monthly salary will be Rs3.2 lakh, Rs2.9 lakh and Rs2.8 lakh, respectively.

Depending on profits, the PSUs are categorised into different schedules, with highest being Schedule A. There are currently 64 Schedule A, 68 Schedule B, 45 Schedule C and 4 Schedule D CPSEs in the country.

The committee has recommended that the rate of house rental allowance (HRA) will be revised to 27%, 18% and 9% when industrial dearness allowance (IDA) crosses 50%, and further revised to 30%, 20% and 10% when IDA crosses 100%. This relates to cities categorised in terms of population.

The panel recommended no change in the IDA pattern and the 100% DA neutralisation shall continue to be applicable.

The revised IDA from 1 January 2017, shall be linked to All India Consumer Price Index (AICPI) (2001=100) series with the base of AICPI as on 1 January 2017, as per the quarterly average of AICPI of September, October and November 2016.

The committee has also suggested that the annual increment be retained at 3% of basic pay. It has further recommended that increment on promotion shall continue to be at par with the annual increment rate (3% of basic pay).

The panel has recommended no change in the retirement age for CPSE employees. The panel said 40% of PRP will come from 10% of a CPSE’s incremental profit. Incremental profit is the increase in profit compared to the previous year’s.

Profit making CPSEs, which can bear the cost of VRS with their own surplus resources, are allowed to implement the VRS policy by allowing compensation and ex-gratia on the revised pay scales proposed to be effective 1 January 2017.

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