Cost to Government : 4 times the salary on paper

I have here an article taken from indiainfo.com, regarding the Sixth Pay Commission and a study on 'Cost to Government' by XLRI, Jamshedpur.

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Cost to Government : 4 times the salary on paper.

A bungalow in Lutyens' Delhi is a dream for most corporate honchos. Not only because of the prohibitive costs but also because there's simply no space available in the heart of 'official' India. So try putting a cost to staying in a house on, say, Shahjahan Road, and the value of 'intangibles' that automatically come with a government job becomes strikingly real.

As a first, the Sixth Central Pay Commission asked XLRI Jamshedpur to do a comprehensive study of 'Cost to Government', a near-equivalent of 'Cost to Company' (CTC), a concept that caught the fancy of a globalizing India Inc after the mid-1990s.

The results of the XLRI study clearly indicated that a simplistic, straitjacketed comparison between government and private sector compensation packages was difficult because of all the invisible benefits that follow when a person works for the state.

The show-stealer, if at all the two worlds were to be compared, was job security or the no-easy-exit rule followed by the government against the hire-and-fire policy of the private sector where even the value of the employee is liable to change every year.

The XLRI team of Professors R K Premarajan, E M Rao and L Gurunathan felt the study would help "clear the employees' misconceptions about the perceived external inequity". The team circulated questionnaires, held discussions with officials and made an exhaustive study of PSUs as well as the private sector before arriving at the conclusions.

The CTG — or total out-go of the government per civilian employee — works out to more than three times the salary s/he gets. It gets better in the railways, possibly the world's biggest single employer, where each staffer's CTG is 3.75 times the salary. In the Armed Forces, it climbs to four times.

"Pay is a relative concept and how well an organization is paying depends to a large extent on the angle of vision of the vision of the employees and the selective comparisons they make," says the report, indicating that a government job should be understood in its entirety and knee-jerk reactions are often partial and uninformed.

The study puts 'returns' from a job into two categories. The first is 'transactional returns', which are perennial and include basic pay, DA, house rent allowance, conveyance and a whole lot of intangibles — housing, free passes, orderlies and telephones, among others. Then come 'relational returns' that refer to benefits or values like self-esteem, self-satisfaction, job challenge, working for a nobler cause, serving the nation and, of course, job security.

"The highest payer may offer little or no relational returns," says the study. Work-life imbalances are nothing new in the private sector where the focus is only on task accomplishment. CTC doesn't take into account the negative aspects of a job and the concept often suffers from one-sided vision. According to the professors, an inflation-indexed pension, along with gratuity and leave encashment benefits, constitutes the biggest draw for a government job. A sizeable 40% of the pension can be commuted and restored to the employee after 15 years of retirement, when s/he would probably need the money most.

There's also house building advance, up to a maximum of Rs 7.5 lakh, where the principal amount can be paid back in 180 EMIs, followed by simple interest payable in 60 more EMIs. This is a benefit any private sector employee would envy.

Healthcare is another perk, with the government incurring Rs 538 per employee every month for 33 years. And, this does not change with change of employer, as is often the case in the private sector. The group insurance component is also attractive. For a cover of Rs 1.2 lakh, the market rate premium would be Rs 249 per month but a government employee has to pay only Rs 36 and the rest (Rs 217) is part of CTG. A pre-pay commission estimate suggests that in a metro like Delhi, the government's cost on a senior officer would be to the tune of Rs 62,385 every month, although his take-home salary is much lower.

Family passes in the railways is a benefit most folks covet. A senior railway official uses 9,364 passes during his 33-year career, each trip averaging 1,000 km. The facility continues post-retirement. A similar lifelong benefit enjoyed by defense personnel is that of tax-free canteens, besides 90 days' annual leave, above the normal 60 days for others.

The main reason why companies resort to CTC calculations, the study points out, is that a consolidated amount would force them to pay 12% provident fund. The employees' need to have more cash in hand and scope for tax concessions through allowances are the other reasons. These factors, however, do not drive the government because it is not constrained by demand-supply considerations.

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