Wage pact: Bankers will get 15% hike, arrears likely in next salary

Move will push wage bill up by about Rs 7,900 cr a year; wage agreement is for the period November 2017 to October 2022

Bank unions and the Indian Banks’ Association (IBA) signed a bipartite wage agreement on Wednesday, giving bank employees 15 per cent hike and pushing up the wage bill by Rs 7,900 crore per year. 

Of this, Rs 3,385 crore is for non-officers; the rest for officers. The wage agreement is for the period between November 2017 and October 2022.

Bank employees can expect to get their arrears before Diwali, but no official communication has been issued yet.  

“All accumulated increments during this period shall be released with effect from November 11," said a statement issued by the officers’ union.  

A statement issued by the IBA states that to inculcate a sense of competition “and reward performance, the concept of performance-linked pay has been introduced for the first time”.

The wage negotiation covered 29 banks — 12 public sector banks, 10 private banks, and seven foreign banks — and 500,000 employees in the banking sector. A joint statement by the four unions representing the workmen said for the first time, there will be uniform basic, dearness allowance, house rent allowance (HRA), special allowance, and transport allowance. The HRA rate will be 10.5 per cent on pay across the country. 

Employees were mainly demanding three things — wages on a par with central pay commission, five-day working week, and updation of family pension.

The first two have not been achieved, but the IBA has agreed to recommend the family pension scheme to the government. It is now the government which will decide whether that facility must be extended to bank employees.  

However, Finance Minister (FM) Nirmala Sitharaman said on Tuesday at the annual general meeting of the IBA that retired bank employees should be treated in the same way as the defence sector. 

Hence, some improvement in pension schemes may be expected from the government, although pension for retired employees improved under the current wage pact. “The non-financial issues like five-day week, update of pension in the wake of the recent announcement made by the FM for seniors, grid holidays, D&A regulations, and introduction of Northeast allowance for all officers were taken up for discussion,” said the statement by the officers’ union. 

Scale 5 officers will get one staggered increment with effect from November this year. The periodicity of such staggered increment will be two years, while for retired employees, the notional periodicity will be every two years since November 2017. 

For the first time, there will be uniform salary structure across the country for the workmen category, instead of separate state-wise slabs at present leading to ‘one nation, one salary’.

The per capita monthly entitlement for bank employees will be higher than all the previous settlements.

“The performance-linked pay will hopefully motivate employees and lead to higher productivity,” said the All India Bank Employees’ Association General-Secretary C H Venkatachalam.

The wage revision will be effective retrospectively from November 2017 till October 2022 and will cover state-owned banks, old-generation private banks such as Federal Bank and Dhanlaxmi Bank, and some foreign banks.

Apart from introducing a performance-linked pay for PSBs contingent upon their operating profit, in the range of 5-15 days of additional income, there have been changes made to the service conditions of workers and officers.

From calendar 2020, employees will be entitled to privilege leave encashment of five days “at the time of any festival of the employee’s choice”, apart from being able to do so at the time of retirement.

The notice period for availing of privilege leave has been reduced to 10 days, from 15. Women employees will be allowed to avail of medical/sick leave to tend to their children’s health and will be able to club their maternity leave with other leaves. Maternity leave in case of legal adoption of a child has been increased from six to nine months.

Most banks have been accounting for a hike in the wage bill, in the range of 12-14 per cent, and have made suitable provisions to their balance sheets since November 2017, so that the bipartite settlement does not immediately hit the finances of lenders.

More importantly, the basic pay will not be increased by more than 2.5 per cent (roughly Rs 1,155 crore). Most of the pension and superannuation costs are linked to the basic pay.

“The cap on family pension of Rs 9,000 a month has been removed. It will be paid at a uniform rate of 30 per cent. The finances of banks will not take a hit as they have already factored in the wage bill increase over the years. The future cost liability will remain limited as there will be only 2.5 per cent unloading on the basic pay component, which was 2 per cent during the last settlement,” IBA Chief Executive Officer Sunil Mehta said.