The fitment benefit, which is occasioned at the time of pay-revision, is granted to those employees who are on rolls of CPSEs as on the date of pay-revision in order to enable their movement to the revised pay scales.
3.6.1 Fitment benefit is primarily the mechanism to ensure corrective measures / adjustments in the Basic Pay (in consideration of the market compensation / trend, etc.), which further leads to deciding the revised pay-scales & related compensation structure.
3.6.2 Fitment benefit recommended by the 1st PRC was 20% of Basic Pay (which was to be added to BP + DA to arrive at the revised BP as on 1.1.1997). The 2nd PRC had recommended fitment benefit of 30% of BP+DA (which was to be added to BP + DA to arrive at the revised BP as on 1.1.2007).
3.6.3 The 7th CPC for Central Government employees has escalated the salary by way of fitment factor of 2.57 times of Basic Pay to arrive at the revised Basic Pay as on 1.1.2016. Further, the Commission has approached the revised Basic Pay by calibrating the same in a graded manner by effectively adopting fitment factor / Index ranging from 2.57 times at lowest level (Level-1) to upto 2.81 times of BP for Apex scale (Secretary level) while fixing their pay in the revised pay-matrix. As the recommendation of 7th CPC applies to all Government employees across levels i.e. from Level-1 to Level-18, however specific to Civil services officers at entry level (i.e. Level-10) the pay-scale escalation Index is 2.67 times of Basic Pay. The 7th CPC goes on to mention in the report that index of rationalization has been enhanced with the levels as the role, responsibility and accountability increases at each step in the hierarchy, and the proposed pay structure reflects the same principle.
3.6.4 The general fitment factor (i.e. 2.57 times of Basic Pay) mentioned above is shown by 7th CPC in terms of increase on Basic Pay; and the said increase in terms of percent of Basic Pay + Central Dearness Allowance (CDA rate was 125% of BP as on 1.1.2016 for Central Government employees) comes to 14.22% of BP+DA.
3.6.5 The Committee acknowledges that the escalation in pay-revision devised by 7th CPC tend to increase towards higher grades, and the trend shown by the external consultant (M/s Aon Hewitt) also reflects that senior level executives command higher pay and better placement in the internal equity level of compensation structure. However, the Committee is of the view that CPSEs being a commercial entity should provide for a reasonable increase in the fixed pay at a uniform level for its executives and should compensate more to the senior level
executives from the variable pay i.e. Performance Related Pay (PRP) drawn from the CPSEs profitability.
3.6.6 Further, the Committee also observed that amongst the CPSEs who are currently following the pay-scales of 2007, many of these may not find themselves in a position to fully implement the revised pay-structure if a high fitment benefit is recommended by the Committee. The long term financial sustainability of the CPSEs, as well as equity in the benefit amongst the CPSEs, were also a paramount consideration of the Committee while deciding on the fitment benefit.
3.6.7 In overall consideration of the revised pay-package, the Committee recommends a uniform fitment benefit of 15% on sum of Basic Pay & Stagnation increment(s) and Industrial Dearness Allowance (IDA).
3.6.8 Accordingly, the fitment methodology to arrive at the revised Basic Pay as on 1.1.2017 shall be as under:-
If the additional financial impact in the year of implementing the revised pay-package is more than 20% of the average PBT of last 3 financial years (FYs), then the revised pay-package with recommended fitment benefit
of 15% of BP+DA should not be implemented in full but only partly, as per the part-stages recommended below:-
Further, in case of improvement in future years in the average PBT of the last 3 FYs, the Board of Directors may decide to implement the full pay package or the higher stage of the pay-package, as the case may be, upon ensuring that additional financial impact of the revised paypackage (i.e. sum total of the part stages pay-package already implemented in the earlier year and the remaining pay-package) do not exceed 20% of the average PBT of the last 3 FYs preceding the year of implementation.
The Committee also acknowledged the situation where in the year of implementation of revised pay-package the additional financial impact as a percentage of average PBT of last 3 FYs of a CPSE is crossing 20% (i.e. Stage-I) or 30% (i.e. Stage-II) or 40% (i.e. Stage-III), however upon excluding the payout of annual Performance Related Pay (as per the recommendation made ahead on PRP) the additional financial impact for that CPSE may be within the full-implementation range (i.e. upto 20%) or within higher part-stages range [i.e. Stage-I (more than 20% but upto
30%) / Stage-II (more than 30% but upto 40%)]. The Committee, thus, will like to clarify that in such situation, the CPSE may not necessarily reduce the fitment benefit as per the lower part-stage but should reduce the PRP payout to the extent of not crossing the impact percentage required for relevant full / part-stage in the year of implementation of revised pay-package by allowing the applicable fitment benefit.