Large state run lenders are seeking to break away from the system of negotiating periodic, industry wide wage settlements with the unions and decide their own pay structures.
Lenders such as State Bank of India (SBI) and Punjab National Bank (PNB)
are exploring the idea of moving to a variable pay structure, which will be
based on the performance of employees.
SBI is looking to introduce an employee stock ownership plan and grading
system based on an employee’s performance, said a senior SBI official on
condition of anonymity. PNB plans to
approach its board with a proposal to introduce performance based pay for all
officials above the level of chief manager. “Today, an employee’s salary is
predictable. There is a need to recognize performance and give remuneration. We
have formed an internal committee of general managers to work on this matter
and submit the proposal to the board,” Usha Ananthasubramanian,managing
director and chief executive officer of PNB, said at an analysts’ meeting,
after the lender’s earnings announcement. Usha also added that PNB had earlier
tried to move to a variable pay structure for all employees under the
chairmanship of K.C. Chakrabarty, but failed in
its attempt.
PNB ran up Rs1,967.16 crore in employee costs for the quarter to September,
up from Rs1,877.56 crore a year ago. SBI’s staff expenses rose to Rs6,257 crore
from Rs5,906 crore in the same period. Banks are discussing moving to their own
pay structures after the finance ministry asked them to start the process for
the 11th bipartite wage pact before the current five year settlement expires in
October 2017. “The ministry has asked banks to start early, instead of waiting
for the culmination of the current wage pact,” an official with the Indian
Banks’ Association (IBA), which groups all banks in India, said on condition of
anonymity.
As large banks explore the idea of moving to their own pay structure, a few
smaller ones including Union Bank, Syndicate Bank and Vijaya Bank have sent
their consent to IBA to be a part of the process for negotiating a new wage
agreement, added the official.
The transition to a productivity linked settlement is easier said than done.
Such a move will face stiff resistance from bank employees’ unions, which are
used to a uniform wage hike. “We will oppose a variable pay structure if banks
go ahead and introduce this system. We are for more efficiency and productivity, but we
don’t want differentiation in salary,” said C.H, Venkatachalam,general
secretary of the All India Bank Employees’ Association.
Bank employees’ unions have, meanwhile, started preparing a charter of demands
that will be submitted to IBA by January 2017.“We are looking at an adequate
hike in salary this time, in conformity with rising inflation. We are also
looking at a higher starting salary for attracting new talent, special
facilities for women and improvement in post retirement benefits,” said
Venkatachalam. Around one million bank employees across public sector banks,
old private sector and a few foreign banks are part of the industry level wage
settlement.
According to the 10th bipartite wage settlement, banks and unions agreed
to a 15% hike in wages, which resulted in an outgo of Rs5,000 crore for the system.
Also agreed to were bank holidays on second and fourth Saturdays.
Also, PSU banks have been reeling under losses and mounting NPAs and
implementing the variable pay structure may be ill timed. “Concept of variable
pay structure is sound. It will encourage employees to make the right decision.
However, implementation will be a challenge,” said Ashvin Parekh, managing
partner, Ashvin Parekh Advisory Services.
Bad news for other PSU bank
ReplyDeleteIba must not allow bank to go on variable pay scale
ReplyDelete