11th Logic Explains - IBA's Performance Based Salary for Bank Employees


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Tuesday, 2 October 2018

Logic Explains - IBA's Performance Based Salary for Bank Employees

Recently Indian Bankers' Association (IBA) has come up with the idea of Annual Increment salary structure for bank employees linked with performance of the bank on various criteria like Return on Assets, Operating Profits, YoY growth etc.

IBA detailed their proposal as under :

1. Category of Banks
2. Percentage Increase YoY in Operating Profit
3. Return on Assets (ROA)
4. Payout as Annual Increment on Establishment cost
5. IBA will payout as Maximum of 8.2% and Minimum of             1.4% as annual increment on Establishment cost.
6. The Annual increment will be paid addition to the existing        6% hike which would be fixed component.

Logic Explains :

Take an example -  consider the Gross Salary as Rs 100 in Scale I with any of the Public Sector Bank. Gross salary includes Basic Pay, DA and HRA.

As per IBA offers of 6%  Fixed Hike in salary :

The salary after fixed hike will be : Rs 100 + Rs 6 = Rs 106 (No DA merging is considered yet)

The Gross Salary with Fixed hike of 6% will be paid after 11th Bipartite to all the employees irrespective of any criteria : Rs 106

Performance Based Annual Increment 

This is where IBA has twisted the 11th Bipartite Negotiation, as per IBA proposed complex formulae, all the banks are categorized on the baisis of performance components i.e. Return on Assets (ROA) and Profitability majorily.

As per offer given by IBA :

Category 'A' Bank :

All such banks which are having Return on Assets (ROA) greater than Zero and Percentage increase in YoY Operating Profit higher than 15%. 

The base year considered for the calculation is 31st March 2018.

Mandatory Criteria : 

Operating Profit : > 15%      |  ROA - >=0

Category 'B' Bank :

Similarly, for category B banks the criteria are :

Mandatory Criteria : 

Operating Profit : 7.1 - 15%  |  ROA - (-)0.24 - 0

Category 'C' Bank :

Similarly, for category C banks the criteria are :

Mandatory Criteria : 

Operating Profit : 0.01% - 7%  |  ROA - (-)0.75 - 0.25

Percentage of Increment Paid on Annual Basis

All such banks, which are having YoY Growth in Operating Profit/Net Profit higher than 15% with ROA of '0' and above will get the annual increment as 8.2% on Establishment cost of 30 days.

For e.g. Indian Bank & Vijaya Bank having ROA as 0.53 and 0.44 respectively with positive Net Profit. They achieved both the criteria as on 31st March 2018 hence qualified for "AA" category.

The Annual increment offered to these two banks as per new scheme will be 8.2% of 30 days establishment cost. 

What is an Establishment cost ?

This is the cost incurred on the staff expenses in general by the organization.

Hence these two Banks' employees will be paid '8.2%' on establishment expenses of average 30 days.

Formula Explains :

Suppose the Establishment expenses of Vijaya bank as on 31st March 2019 is Rs 100 and there are 50 employees in the Bank, in such case the 

Annual Increment with new formula will be  :
For e.g. in Vijaya Bank

Establishment Expenses For Year  : Rs 100

Establishment Expenses of 30 Days : 100/365*30 = 8.21

Increment for each employees : 8.21/50 = 0.16

Gross Salary of employees as on 31st March 2018 : Rs 100

Gross Salary with Annual Increment : Rs 100 + (Rs 100 X 0.16)  =  Rs  116 (Other than Fixed hike)

Annual Increment offered to each employees in "AA"category bank will be 0.16 factor. Similarly each of the bank will be classified and paid as per their categories.

We will uodate the details salary structure of all the banks based on ROA and profitability soon.

Subscribe to get the notifications at earliest !!!

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