Salary in 11th Bipartite Settlement
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.
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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.