After the SOE pay revision

The finance ministry’s amended notification on the state-owned enterprises (SOE) pay revision has calmed down a lot of infuriated employees in the SOEs, especially at the higher level.

The previous notification, which did away the perks SOEs enjoyed got the employees worked up. SOEs enjoy perks, higher at the higher levels. The numerous company specific allowances, often not reflected openly, add up to the salary and perks.

The government has rectified the mistake and left it to the individual service rules of the SOEs. SOEs welcomed this.

However, there is a catchphrase in the notification.

It states that boards of SOEs should carefully study the various allowances employees were entitled until today. This is to ensure relevance, affordability, and to prevent proliferation of allowances.

Perks and allowances are important to drive performance, but without control or standards, it could get out of hand. Besides, the way we govern our SOEs, allowances are just another automatic benefit and not necessary to drive performance. It doesn’t necessarily reward performers. Most allowances are uniform in nature. It is a soelra, for both performers and free riders.

Such allowances get more complicated when a SOE is fully funded by the tax money or at the cost of the public. 

The performance-based variable allowance is not a new concept. It is in place in some companies. How the performance is evaluated is subjected to questions. It will depend on a lot of things, nature of the business, size of company and the mandate.

Extending it to SEOs is a good decision. It should bring efficiency, which in turn should drive performance. It is said that performance will not be measured only by profit made. This is good because some are non-commercial while some have huge social mandates.

Even among the DHI owned companies, some are not making profit, but their performance is based on parameters like improvemnet in services, reducing losses and cutting down cost. If companies can make service delivery efficient, it is already an achievement.

For the public, the company with the best service should be rated the best performer.

In driving performance, there could be repercussions. We could forget our priorities. As a GNH country, we do not want every performance to be dictated by profit!

However, with the PBVI and SOEs signing compacts with the finance ministry, a lot has to change in governing SOEs. Companies will have to take bold decisions. Non-performers will go because we cannot hang on to the kidu culture if companies are going to be judged by performance.

The government has to take bolder, not populist decisions, if they think some SOEs are enjoying too much perks or allowances at the cost of the people and without improving services.

To start with, we have to keep “up” the system that is always “down” in many of our companies that cater to the general public.

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