7th CPC vis-à-vis UK’s Senior
Salaries Board 2015
A comparative statement with 20:20
hindsight
Part I
7th CPC Report released
in Nov 2015
Composition
The Seventh Central Pay
Commission had Justice (retd) A K Mathur as the Chairman, with Shri Vivek Rae
IAS (retd) and Prof Rathin Roy as Members.
Every other service was
represented in the phalanx of officers, except the Defence Forces.
However, one Shri D K
Rai, Director at that time, was one, in the words of the Chairman, “who had a
deep insight into the financial matters especially, the defence. His knowledge
about defence finance has been of great help to this Commission in determining
the pay structure for the defence forces.”
Recommendations of the Seventh
Central Pay Commission pertaining to Defence Forces
General
Approach to the Pay Matrices: Civil and Defence
5.2.3. Pay levels have been set out in a pay matrix,
separately for civilian and defence forces Personnel. The Commission has
evolved a fresh approach by merging the grade pay and pay bands into distinct
pay levels. The approach regarding the pay levels and pay matrix has been
explained in Chapter 5.1. Some of the major points in the pay matrix which have
a common bearing on civilian and defence forces personnel are highlighted below.
5.2.4. Pay Bands and Grade Pay: Pay
Bands and Grade Pays have been dispensed with and the new functional levels
have been arrived at by merging the Grade Pay in the Pay Band. All the existing
levels have been subsumed in the new structure.
5.2.5. Entry Pay: The entry pay for various
ranks of defence forces personnel, other than MNS Officers, has been arrived at
on the same premise, as has been done in the case of civilian. As an
illustration, entry pay for a Captain has been arrived at as follows:
Entry pay
in existing pay band + (Residency Period for promotion to Captain from
Lieutenant x annual increment) + grade pay of the rank of Captain = ₹15,600 + (2 x ₹630) + ₹6,100 = ₹22,960.
5.2.6. An exception to this approach
has been made in the case of Brigadiers/equivalents where pay for the rank has
been arrived at as per the fitment table notified by the Ministry of Defence
through its Special Army Instructions of October 2008.
5.2.11. Equivalence in Pay Levels for Certain Levels:
The starting pay level for officers at Group `A’ entry level is identical
at ₹56,100 in
the case of both civilian and defence service officers. Similarly the pay of the
Major General and Joint Secretary and equivalent officers and those above
[viz., Lieutenant General (in HAG, HAG+, Apex) and Chief of each defence
service] has been kept identical with their civilian counterparts.
Identical pay level has been devised for JCO/ORs and their
civilian counterparts corresponding to the existing pay bands and grade pay.
5.2.8 Rationalisation: An ‘index of
rationalisation’ has been applied while making enhancement of levels from Pay
Band 1 to 2, 2 to 3 and 3 onwards on the premise that role, responsibility and
accountability increases at each step in the hierarchy. At the existing PB-1,
this index is 2.57, increasing to 2.62 for personnel in PB-2 and further to
2.67 from PB-3.
Recognising
the significantly higher degree of responsibility and accountability at levels
corresponding to Senior Administrative Grade, the entry pay is recommended for
enhancement by a multiple of 2.72. The same multiple is also being applied at
the HAG and HAG+ levels (emphasis supplied). At the apex level the index applied is
2.81 and for the Service Chiefs/Cabinet Secretary the index has been fixed at
2.78.
Military Service Pay (MSP)
5.2.22. The defence
forces personnel, in addition to their pay as per the Matrices above, will be
entitled to payment of Military Service Pay for all ranks up to and inclusive
of Brigadiers and their equivalents. The Commission recommends an MSP for the
four categories of Defence forces personnel at ₹15,500 for the Service Officers, ₹10,800 for Nursing Officers, ₹5,200 for JCO/ORs, and ₹3,600 for Non Combatants (Enrolled) in
the Air Force per month. MSP will continue to be reckoned as Basic Pay for
purposes of Dearness Allowance, as also in the computation of pension. Military
Service Pay will however not be counted for purposes of House Rent Allowance,
Composite Transfer Grant and Annual Increment.
6.1.28. Taking note of the specific problems faced by
Defence Forces personnel (viz., Army, Navy and Air Force) on account of rigours
of military life, the VI CPC recommended an additional, separate element of pay
for the Defence Forces called Military Service Pay (MSP).
The VI CPC also intended, it was in
fact so articulated, that the edge previously enjoyed by the Defence Forces,
over the civilian scales would be replaced by the MSP.
6.1.29. Para 2.3.12 (page 76) of the VI CPC Report inter
alia states: “The edge enjoyed by the Defence Forces over the civilian
scales will, after suitable enhancement to meet the genuine aspirations of the
Defence Forces, be given as a separate element called Military Service Pay.”
6.1.31. The Commission, after
careful consideration of the matter, notes that there are exclusive elements
that distinguish the Defence forces personnel from all other government
employees. The intangible aspects linked to the special conditions of service
experienced by them set them apart from civilian employees. Defence forces
personnel are expected to conduct full spectrum operations in operational
environments which are characterised
by extreme complexity and may include force projection outside India’s territorial
boundaries. Defence forces personnel are trained for war like situations with
highly sophisticated war machinery. They have to keep themselves posted in
modern warfare. The military institutions are a key symbol of national pride.
Further, the superannuation of defence personnel, particularly Other Ranks
(ORs) at a younger age, is also a factor that has been considered. The Commission
has therefore taken a conscious decision that the Military Service Pay, which
is compensation for the various aspects described above and for the edge
historically enjoyed by the Defence Forces over the civilian scales, will be
admissible to the Defence Forces personnel only (emphasis in the original Report).
6.2.114. Applicability of MSP: A demand has
also been made that MSP be granted to all officers. Currently MSP is paid up to
the level of Brigadiers. The IV, V and VI CPCs, on examination of the issue,
granted Rank Pay/Military Service Pay up to the level of Brigadier.
Superannuation of personnel at a relatively younger age is
one of the important considerations being laid down by this Commission for the
grant of MSP. Major General and equivalent officers and those above them retire
at 58 or beyond, thus serve for periods comparable, with their civilian
counterparts. Having regard to all these factors the Commission is of the
view that the existing application of MSP up to the level of Brigadier is appropriate
and does not call for a review
(emphasis in the original).
6.2.115
MSP to be distinguished from ‘Edge’:
The V CPC, after deliberating on the issue of
Military Service Pay, did not recommend granting it. It recommended continuance
of all existing concessions and also recommended an edge in the starting pay
scale. The VI CPC introduced the Military Service Pay for all Officers up to
the level of Brigadiers, without reducing the existing concessions.
The VI CPC went on to state upfront that MSP constitutes the
‘edge’ being provided to the defence forces personnel over civilian pay scales.
This Commission taking note of the evolving pay structure of the defence forces
personnel and what has been averred by the VI CPC is in agreement with it
and is of the view that MSP is the ‘edge’ being provided to the defence forces personnel.
Please return and read Para 5.2.8 above
– Rationalisation before looking at the table below
Comment: It may be seen from
the revised/amended Pay Matrix that when MSP is added to and at highest levels
of Basic Pay of Level 13 (Gp Capt) and Level 13A (Air Cmde), then officers of
levels 14 and above, though paid higher Basic Pay, receive lesser emoluments
which also adversely affects pension (pension being 50% of RE) as illustrated
below:
Level
|
Rank
|
Reckonable
Emoluments
|
Pension
|
Level 13 Row 16
|
Group Captain (Gp Capt)
|
203500+15500 = 219000
|
109500
|
Level 13 Row 17
|
Group Captain
|
209600 + 15500= 225100
|
112500
|
Level 13 Row 18 (Maximum)
|
Group Captain
|
215900+15500 = 231400
|
115700
|
Level 13 A Row 14
|
Air Commodore (Air Cmde)
|
205100+15500= 220600
|
110300
|
Level 13A, Row 15
|
Air Commodore
|
211300+15500= 226800
|
113400
|
Level 13A Row 16
(Maximum)
|
Air Commodore
|
217600 =15500 = 233100
|
116550
|
Reckonable
Emoluments & Pension of Levels 14 to 17
|
|||
Level 14 (Maximum)
|
Air Vice Marshal (AVM)
|
218200
|
109100
|
Level 15 (Maximum)
|
Air Marshal (Air Mshl) HAG
|
224100
|
112050
|
Level 16 (Maximum)
|
Air Marshal HAG+
|
224400
|
112200
|
Level 17 (Apex I, Fixed)
|
VCAS/AOC-in-C
|
225000
|
112500
|
So much for the expertise of Shri D K
Rai! How Chairman & Members accepted it??
A Non-Partisan Study by IDSA commissioned by 7th
CPC
6.1.7 The Institute for Defence Studies and Analyses (IDSA)
was also commissioned to undertake a study on the “Nature, Quantum and Components of Defence Expenditure and Defence
Pensions.” The purpose of this engagement was to obtain an independent
feedback from a non-partisan body dedicated to research and policy in defence
and security, with particular reference to pay, pension and defence expenditure
in India and comparable countries.
However, nowhere in Chapter 6.1 (from
Para 13 to 18) has the 7th CPC commented on what IDSA published on
X-Factor for Senior ranks of the Armed Forces of UK (given that they retire
around the same ages as in Indian Defence Forces – see Para 5.12. on SSRB
Report 2019 below) nor on the Combat compensation for the Armed Forces of the
USA. A few extracts from the IDSA report follow.
From
the IDSA report
IDSA was tasked by the 7th Central Pay Commission vide Work
Order Number 7th CPC/62/Studies/IDSA/2 dated 16-07-2014 for conducting a study
on “Nature, Quantum & Components of Defence Expenditure and Defence
Pensions, inter alia, Analyse the nature, quantum and components of Defence
Expenditure from 1995-96 to 2013-14 with a specific focus on salary versus
non-salary component. How this compares with similarly placed counties may also
be analysed in detail.
4.53 ‘X-factor’, was introduced in 1970 in recognition of
the disadvantages of service life, such as: danger; turbulence; separation;
hours of work; restrictions on leave and access to trade union membership; impact of the job; and social
aspects of the job. X-Factor is an addition to pay, which recognises the
special conditions of service experienced by members of the Armed Forces
compared with civilian employment. The rate of the X-factor is reviewed every 5
years by the AFPRB. In 2008 the AFPRB recommended that the X-factor be
increased by 1% to 14% of base salary. This was last reviewed in 2013. AFRB had
undertaken a full examination of a wide range of evidence including MOD’s
assessment of changes for the military; independent research on civilian
trends; and views of Service personnel and their families. AFRB’s independent
analysis of the evidence led it to conclude there had been deterioration in the
conditions of military life relative to civilian life. AFRB recommend that
X-Factor should increase by 0.5 percentage point to 14.5 per cent. .
USA
4.55 Every
four years, the president directs56 “a complete
review of the principles and concepts of the compensation system for members of
the uniformed services.” The First Quadrennial Review of Military Compensation
(QRMC) was convened in 1965.
4.67 Combat Pay and Combat Zone Tax Exclusions: The
report examined these in detail, and based on their detailed analysis has
recommended a review, which ensures a fair reward proportionate to the risk. It
brings out that the two types of combat pay i.e. Hostile Fire Pay (HFP) and
Imminent Danger Pay (IDP) are meant to cover two different situations. HFP had
traditionally been reserved for the hazards of open warfare, not for the risks
associated with low-intensity conflicts outside of war zones, which characterized
many of the military deployments and peacekeeping operations of the 1980s and
1990s and Imminent Danger Pay (IDP), which provided
HFP-equivalent
pay to members in imminent danger due to civil war or insurrection, terrorism,
or wartime conditions was introduced.
4.71 The
11th QRMC recommended:
Establish
differentials in hazardous duty pays:
• Set
Hostile Fire Pay at an amount higher than Imminent Danger Pay.
• Establish more than one level of Imminent Danger
Pay to recognize different levels of exposure to danger.
When the sublime gets ridiculous!
From page 110 of the IDSA report
7th CPC wanted IDSA to
“Compare the salary structure of personnel in the Indian Defence Forces with
those in similarly placed countries, preferably in purchasing power parity
(PPP) terms” (emphasis supplied)
“4.73 Purchasing-power
parity in theory implies that the exchange rate between one currency and
another is in equilibrium when their domestic purchasing powers at that rate of
exchange are equivalent. In short, what this means is that a bundle of goods
should cost the same in India and the United States once you take the exchange
rate into account. But in real life what one gets to see is different. The theory may be tested using two American
products that are globally available. One product is the ‘Apple I Pad’ (emphasis
supplied). Apple product is designed in America, major portion of hardware used
is manufactured in South East Asia and the products are assembled in China.
The other
product is the MacDonald’s ‘Big Mac Burger’ (emphasis supplied). The
recipe is standard all over the world; the ingredients are sourced, the wages,
outlet rentals, establishment costs are incurred as per the local market and
priced for sale in local currency. The ‘Big Mac index’ was invented by The
Economist in 1986 as a light-hearted
guide (emphasis supplied) to whether currencies are at their “correct”
level. It is based on the theory of purchasing power parity (PPP), the notion
that in the long run exchange rates should move towards the rate that would
equalise the prices of an identical basket of goods and services (in this case,
a burger) in any two countries. The price of both these global products is used
to test the theory. While purchasing power parity theory helps us understand exchange
rate differentials, exchange rates do not always converge in the long run the
way PPP theory predicts.”
Certain tables were provided by IDSA and 7th CPC
Report states “6.2.26 The tables above point to the fact that defence
service officers and JCO/ORs in India, based on VI CPC pay scales, are placed
quite well in terms of pay, even in relation to defence personnel in countries
like US and UK, where the GDP per capita in PPP terms for the country as a
whole is significantly higher than that of India- 9.4 times in the case of US
and 6.7 times in the case of UK ” and
goes on to add, (virtuously?), “6.2.27 These conclusions are equally
applicable to Civilian employees who are similarly placed” but is no evidence
(ah, yes, evidence!) in the tables on
Page 111 and 112 on the Purchasing Power
Parity of Civilian Officers of the Govt of India vis-à-vis Civilians officers
of the UK or the USA.
Just curious:
1. How
many Defence Forces officers purchased/used Apple I Pad? How many have
ordered/eaten Big Mac Burger? So couldn’t the IDSA find some other products of
every day use – milk? Whole wheat bread? Vegetables like tomato/potato?
2. Why
didn’t the 7th CPC request IDSA or any other “non-partisan” expert
body to compare PPP vis-à-vis salaries of Civilian employees (particularly IAS)
with counterparts in the other countries?
3. And
the case for continuing the edge for IAS was defended vigorously by the Member
of the 7th CPC, the argument by Shri Vivek Rae (IAS retd) was all of
pages 151 to 157 (7 pages) citing several Court judgments. On the MSP for Maj
Gen & above was dismissed inspite of higher Index of Rationalisation (2.72
& 2.81)on (a) precedent, (b) retirement ages of 58 years summed up in 4
short paragraphs.
Further, there were many judgments to
justify why a Senior officer cannot draw lesser pay/pensions than a junior
officer. (Some of which have been quoted in Writ Petition No. 36589 of 2019 in
the honourable High Court for the States of Punjab & Haryana).
Perhaps ‘Charlie’ Browne was under some
pressure not to take up the offer of Shri Pranab Mukherjee (who in 2006
recommended to then Prime Minister that Defence Forces Pay etc should be
referred to a separate Pay Committee/Commission). Even the presence of a knowledgeable Defence Forces member
would have also ensured that Defence Forces be heard.
Part
II
Armed Forces Pay Review Body &
Senior Salaries Review Body of United Kingdom
1
April 2014 and 1 April 2015 military salaries including X-Factor incorporating
our recommendations released in March 2015
Review of X-Factor components
3.86. Our 2014 Report included a
section outlining proposed amendments to the individual elements that make up
the X-Factor, in order to ensure it is more relevant and measurable. We
committed to seek the views of the SFFs and MOD before confirming the revised
components, and this section reports back on those views and includes a table
setting out the final list. Definitions of the components can be found in
Appendix 7.
3.87. X-Factor is a pensionable addition to pay
that recognises the special conditions of service experienced by members of the
Armed Forces compared with civilians. It accounts for a range of potential
advantages and disadvantages which cannot be evaluated when assessing pay
comparability. X-Factor is not intended to compensate for the particular
circumstances that Service personnel face at any one time; rather it reflects
the broad balance of advantage and disadvantage averaged out across a whole
career. We last reviewed X-Factor in our 2013 Report and concluded that there
had been a relative deterioration in the conditions of military life relative
to civilian life and therefore recommended a 0.5 percentage point increase in
the level of X-Factor from 14 to 14.5 per cent.
3.90. Table 3.1
below sets out the revised X-Factor components. Definitions can be found in
Appendix 7.
Table 3 1 Revised
X-Factor components
Ø Turbulence
Ø Spouse/partner employment
Ø Danger
Ø Separation
Ø Job security
Ø Hours of work
Ø Stress, personal relationships and impact of the job
Ø Leave
Ø Training, education, adventure training and personal development
Ø Promotion and early responsibility
Ø Autonomy, management control and flexibility
Ø Individual, trade union and collective rights
Ø Travel to work
xxxx xxxx xxxx
All salaries are annual JPA salaries rounded to the
nearest £.
Table 1 1: Recommended annual scales for Officers up to and
including Commodore, Brigadier and Air Commodore
Rank
Military salary £
|
||||||
1 Apr 2014
|
1 Apr 2015
|
|||||
OF-6
|
||||||
Commodore (Royal Navy)
|
Level 5
|
103,167
|
104,198
|
|||
Brigadier (Royal Marines)
|
Level 4
|
102,156
|
103,178
|
|||
Brigadier (Army)
|
Level 3
|
101,158
|
102,170
|
|||
Air Commodore (Royal Air Force)
|
Level 2
|
100,156
|
101,158
|
|||
Level 1
|
99,154
|
100,146
|
||||
OF-5
|
||||||
Captain (RN)
|
Level 9
|
91,466
|
92,381
|
|||
Colonel (RM)
|
Level 8
|
90,431
|
91,335
|
|||
Colonel (Army)
|
Level 7
|
89,396
|
90,290
|
|||
Group Captain (RAF)
|
Level 6
|
88,365
|
89,248
|
|||
Level 5
|
87,334
|
88,207
|
||||
Level 4
|
86,303
|
87,166
|
||||
Level 3
|
85,272
|
86,124
|
||||
Level 2
|
84,236
|
85,079
|
||||
Level 1
|
83,205
|
84,037
|
||||
OF-4
|
||||||
Commander (RN)
|
Level 9
|
79,524
|
80,320
|
|||
Lieutenant Colonel (RM)
|
Level 8
|
78,496
|
79,281
|
|||
Lieutenant Colonel (Army)
|
Level 7
|
77,467
|
78,242
|
|||
Wing Commander (RAF)
|
Level 6
|
76,448
|
77,212
|
|||
Level 5
|
72,296
|
73,019
|
||||
Level 4
|
71,394
|
72,108
|
||||
Level 3
|
70,491
|
71,196
|
||||
Level 2
|
69,589
|
70,285
|
||||
Level 1
|
68,679
|
69,366
|
||||
2-star, 3-star, 4-star and Chief of the Defence Staff pay scales 2015
Recommendation 6: We recommend that the pay
scales below apply for 2-star, 3-star, 4-star officers and the Chief of the
Defence Staff (CDS) with effect from 1 April 2015.1, 2
2-star 3-star 4-star CDS
Scale point £
6
5
4
|
122,914
120,555
118,241
|
157,355
152,845
148,468
|
190,795
187,054
183,386
|
260,355
|
3
|
115,972
|
142,856
|
178,914
|
255,250
|
2
|
113,747
|
136,174
|
174,549
|
250,245
|
1
|
111,567
|
129,811
|
170,292
|
245,338
|
1 Figures are rounded to the nearest pound.
2 This includes X-Factor which is applied at the rate of £2,543,
this sum being equivalent to 25 per cent of the cash value of X-Factor at the
top of the OF4 pay scale as recommended by the Armed Forces’ Pay Review Body
(AFPRB) from 1 April 2015
X-Factor is more clearly explained in the Report of 2019
Page 84
5.16 The
X-Factor is a pensionable addition to
pay, which recognises the special conditions of Service experienced by members
of the Armed Forces compared to civilians over a full career
(emphasis supplied).
5.17 In
2008, the SSRB recommended the introduction of the X-Factor taper for members
of the senior military. This was in response to the AFPRB’s 2007 review of
X-Factor and proposals put forward by the MoD to the SSRB. Prior to this time, no officers above 1-star received the X-Factor.
The evidence suggested that members of the senior military were increasingly
seeing a deterioration in the overall ‘package’ of life in the Armed Forces and
were being deployed more frequently in operational theatres. The SSRB also
noted an increase in the number of 2-star officers leaving the Armed Forces. It
therefore concluded that both 2-star and 3-star officers should receive an
element of the X-Factor.
5.18 The
SSRB therefore recommended that 2 and 3-star officers should receive X-Factor
at the rate of 25 per cent, phased in over three years.90
5.19
The AFPRB carries out a review
of the X-Factor every five years to determine whether the conditions of
military life (based on 13 components) persist 91
Footnotes: -
90 The recommendation was for 2 and
3-star officers to receive X-Factor, with payments of 15 per cent of the cash
value at the top of the OF4 scale in 2008-09, 20 per cent in 2009-10 and 25 per
cent from 2010-11.This recommendation was accepted by the government and the
taper has remained unchanged since.
91 The 13 X-Factor components are as
follows: turbulence; spousal/partner employment; danger; separation; job
security; hours of work; stress, personal relationships and impact of the job;
leave; training, education, adventure training and personal development;
promotion and early responsibility; autonomy, management control and
flexibility; individual, trade union and collective rights; and (whether)
travel to work relative to civilian life have improved, worsened or remained
the same over the preceding five-year period.
The
last review was carried out in 2018 and concluded that there was insufficient
evidence for a change. The AFPRB recommended that the X-Factor remain at the
existing rate of 14.5 per cent (of base pay). It said that the MoD’s evidence
had provided a mixed picture for senior officers across both Review Bodies,
with higher workload pressures reported by some while others felt that
compensation for X-Factor was sufficient. The AFPRB concluded that, while there
was insufficient evidence this year to recommend any immediate change to the
tapering arrangements, it felt that the issue merited ongoing consideration.92
Footnote: -
92 Armed Forces’ Pay Review Body
Forty-Seventh Report 2018 (paragraph 6.2), “MoD’s evidence to us this year
provided a mixed picture for senior officers: higher workload pressures
reported by some, whilst others felt that the compensation offered through
current X-Factor arrangements were sufficient. While we do not believe that we
have seen evidence this year to justify any immediate amendment to the tapering
arrangements, we consider that this issue merits ongoing consideration and will
seek to explore it further with relevant parties in our forthcoming visits
programme. Any work will need to be co-ordinated with the Review Body on Senior
Salaries whose remit includes the most senior members of the military.”
Recommendation
11: We recommend that the minimum guaranteed increase to base pay (excluding
X-Factor) on promotion from 1-star to 2-star does not fall below 10 per cent.
|
5.83 We are conscious that if 1-star officers receive a higher pay award than
2-star officers (emphasis supplied), it could lead to an erosion of the
minimum 10 per cent increase in base pay on promotion. However, not all 1-star
officers are promoted from the top increment on the 1-star scale (108). If different pay awards are made to
the AFPRB and SSRB remit groups, the following mitigating options could be
taken: Application of a further increase to the lowest 2-star officer pay
point.
(i) Removal of the lowest pay point for 2-star officers.
(ii) Discretionary
action to ensure that the minimum 10 per cent increase to base pay is
maintained on promotion from 1-star to 2-star for those on the top pay
increment before promotion.
108. Paragraph 5.14 notes that data provided by the MoD showed
that only four out the 18 officers promoted from 1-star to 2-star in the 12
months from 1 April 2017 to 31 March 2018 were on the top pay increment before
promotion.
5.84 We acknowledge that the MoD
requested take-home pay be taken into consideration when making our
recommendations. We are aware that individuals earning at pay levels between
£110,000 and £150,000 face the withdrawal of their personal tax allowance, so
that the effective marginal tax rate is 60 per cent. However, it is not in the
Review Body’s remit to compensate for income tax, especially where this affects
all individuals earning at the same level equally.
[See: https://www.gov.uk/government/publications/armed-forces-pay-review-body-forty-seventh-report-2018.
It
explained that any work (by AFPRB) on reviewing the X-Factor taper would need
to be co-ordinated with the SSRB.]
Quod
Erat Demonstrandum
