Public-sector banks mull performance-linked salary

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Bank unions oppose this revised salary structure saying it is impossible to accurately evaluate performance in the banking sector.

If public-sector banks (PSBs) have their way, top employees may have a performance-linked salary structure. In a one-of-its-kind move, PSBs—such as State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB)—are planning to introduce performance-based incentives for individuals above the general manager grade. However, this can only be implemented after Government approval.

The structure will be a component of variable and fixed pay. Banks, such as SBI and BoB, are planning to follow suit and are working on a compensation framework.

This kind of a salary structure also exists in many private banks, where depending on the performance of the bank and the individual, employees are offered variable pay in the form of cash or stock-linked instruments, with employee stock-option plans.

Normally, pay and allowances across levels of employees in PSBs are usually decided through bipartite settlements between the Indian Banks’ Association (IBA), the United Forum of Bank Unions (UFBU), and the management of the banks.

This proposed salary structure comes in the wake of opposition from bank unions against six PSBs— PNB, SBI, BoB, United Bank of India, Indian Bank and Oriental Bank of Commerce—for restricting the wage negotiations up to senior-manager level. The unions are demanding a wage hike for up to scale VII, including positions such as general managers, deputy general managers, divisional managers and assistant general managers.

However, the bank unions are completely against performance-based salary structure and insist on one rank and one pay. They argue that unlike the corporate sector, where people are hired to perform specific jobs, it is not easy to evaluate exact performance of bank employees in all positions in PSBs.

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