Performance Related Pay (PRP): Examples for calculating Kitty factor/Allocable profit
PRP Kitty Distribution : within 5% of profit accruing from core business activities
(hereinafter, for brevity, referred to as Profit).
Ratio of relevant year’s profit : incremental profit = 65 : 35
| Sl. | Parameters | Amount (Rs.)/ %age |
|---|---|---|
| 1 | FY 2016-17 | Profit = 5000 crore |
| 2 | FY 2017-18 [for which PRP is to be distributed] | Profit = 6000 crore |
| 3 | Incremental profit | 1000 crore |
| 4 | 5% of the year’s profit | 300 crore |
| 5 | Allocable profit out of current year’s 5% of profit based on distribution in the ratio of 65:35 towards the year’s profit and incremental profit: |
|
| a | PRP payout from year’s profit | 195 crore [i.e. 65% out of 300 crore] |
| b | PRP payout from incremental profit | 105 crore [i.e. 35% out of 300 crore]: [105 crore can be fully utilized as incremental profit is 1000 crore.] |
| 6 | Full PRP Payout requirement (computed for all executives based on Grade-wise ceilings, CPSE’s MOU rating, Team rating & Individual performance rating) – but without applying kitty factor related to year’s profit or Incremental profit |
300 crore |
| 7 | PRP payout break-up based on 65:35 distribution out of year’s profit and incremental profit: | |
| a | PRP amount required out of year’s profit (i.e. 65% of Sl. No. 6) |
65% of 300 crore = 195 crore |
| a1 | Cut-off factor(1) (in %age) for year’s PRP payout with reference to Sl. No. 5(a) & 7(a) | 195 crore / 195 crore = 100.00% |
| b | PRP amount required out of incremental profit (i.e. 35% of Sl. No. 6) |
35% of 300 crore = 105 crore |
| b1 | Cut-off factor(2) (in %age) for incremental PRP payout with reference to Sl. No. 5(b) & 7(b) |
105 crore / 105 crore = 100.00% |
| 8 | Thus, total istribution Profit amount allocated for distribution | 195 crore + 105 crore = 300 crore [i.e. 5% of Core business / operating profit] |
| 9 | Kitty factor for respective Grade (in %age) | [65% x Grade PRP ceiling (%) x Cut-off factor(1)] Plus (+) [35% x Grade PRP ceiling x Cut-off factor(2)] = Kitty factor |
PRP Pay out to CMD Schedule A, CPSE, 2017 Pay Scales
| Sl | Parameter | Amount(Rs)/%age Payout |
|---|---|---|
| A | CPSE’s MOU Rating [Weightage = 50%] |
100% |
| B | Team’s Ratings [Weightage = 30%] |
100% |
| C | Individual’s performance ratings [Weightage = 20%] |
100% |
| D | Grade Ceilings(CMD) (Max 150% of BP) |
150% of BP |
| E | Cut-off factor(1) | 100.00% |
| F | Cut-off factor(2) | 100.00% |
| G | Kitty factor for CMD Ie [65% * D(grade PRP ceiling * E(Cut off factor(1))] Plus [35%* D(Grade PRP Ceiling) * F(Cut –Off factor(2)) ] |
[65% x 150%x 100%] + [35% x 150%x 100%] 1.5 = 150 %. But as per guidelines, Kitty factor is restricted to 100%. |
| H | Net PRP | |
| I | Factor –X [Company’s Performance Component] |
Wtg (50%) x A x G = 50 x100x 100 = 50% |
| Ii | Factor –Y [Team’s Performance component] |
Wtg (30%) x B x G = 30x 100 x 100= 30 % |
| Iii | Factor –Z [Individual’s Performance component] |
Wtg (20%) x C x G = 20x 100 x 100= 20 % |
| I | PRP Payout distribution | Factor X +Factor Y +Factor Z = 100 % of Basic Pay |
| J | Total PRP payment (Minimum Annual Basic Pay for CMD Schedule A CPSE) | 100% of Rs 24,00,000/‑ = Rs 24,00,000/‑ |
