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Performance Related Pay (PRP) : Method for calculating Kitty factor / Allocable profit

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Performance Related Pay (PRP): Examples for calculating Kitty factor/Allocable profitPerformance Related Pay

Payment of Performance Related Pay (PRP) : Pay revision of Executives and Non-Unionised Supervisors of CPSEs from 1st Jan 2017

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/‑

Signed Copy & PRP Examples

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