Following the recommendations of Justice Dharmadhikari Committee on pay parity, Air India (AI) on Thursday abolished the performance linked incentives (PLI) paid to the employees as part of their monthly salaries. The new salaries would be according to the department of public enterprises (DPE) guidelines and would be effective from July 2012.
The carrier has 26,481 employees at a monthly wage bill of R3,200 crore. Barring around 6,500 licensed pilots, engineers and cabin crew, the move will affect the payrolls of over 20,000 employees. For pilots, engineers and cabin crew, the PLI has not been abolished as of now but the carrier will approach the Cabinet next week to bring their salaries as per industry standards. An AI official said the abolition of PLI for employees other than pilots, engineers and cabin crews would not lead to any substantial reduction in the wage bill. This is because for lower level employees, PLI amounts to only 10-15% of their salaries, whereas for engineers, it is almost 50% of their salaries.
In the case of pilots it is even higher at 80%. Since the salaries of pilots, engineers and cabin crew in AI is higher than their private sector counterparts, the airline would be able to bring its wage bill down only once they are aligned with industry standards.
The performance linked incentives (PLI) was introduced in 1993 for the Indian Airline’s pilots for better efficiency. It was gradually brought in for all category of employees. The employees were paid PLI if the carrier?s on time performance (OTM) was 66%. However, later the OTM was brought down to 56%. The idea also did not go well with the financial performance of the airline, whose PLI payment went up despite its losses. In 2004-05, the erstwhile Indian Airlines had a profit of R66 crore and its PLI payment was R438 crore. In 2009-10, the company paid R750 crore PLI, even as the merged entity incurred a loss of Rs.2,774 crore.
The government had last year set up the Justice Dharmadhikari Committee to prepare a report on pay and wage rationalisation of Air India (AI). The committee in its report has suggested that PLI should be replaced with the Profit/ Productivity Related Pay (PRP) which would be determined on the achievement of Key Performance Indicators (KPIs) like yield, aircraft utilisation, passenger load factor, on-time performance and revenue achievement. The PRP would be given only after the cash strapped carrier starts making profit.
