IDBI Bank may do away with variable pay

Within months of implementing variable pay, IDBI Bank has decided to review the system, which has faced flak from its employees and the government. It is the only public sector lender to have this system,

Top executives of the Mumbai-headquartered entity told Business Standard that R M Malla, IDBI Bank’s new chairman and managing director, had set up a committee comprising executive directors to review the structure, besides the new service rules that reduced the number of holidays each employee was entitled to and increased the working hours.

The executives said the committee had been asked to get feedback from employees and suggestions on how to restructure the pay packages since a 20 per cent hike was also announced along with these measured. “It is difficult to roll back the hike and say that the variable pay regime is off. Once you provide a hike, it’s tough to tell people that we will do away with the 30 per cent variable component as well as the hike,” said a senior executive.

Employees were complaining that the changes introduced by the then Chairman and Managing Director, Yogesh Agarwal, in February, were difficult to implement since there was no performance measurement system.

Besides, the system was seen as unfair to junior employees, who received lower hikes. Bank employee unions had also complained that the lender decided to introduce the scheme despite the Indian Banks’ Association (IBA) dropping a similar plan in the absence of a performance measurement system. IDBI Bank is not covered by IBA’s industry-wide wage settlement that includes public sector and old-generation private banks.

In March, The All India IDBI Officers Association filed a writ petition in the Bombay High Court challenging the bank’s decision to change service conditions and implement variable pay.

The government had also asked the IDBI Bank management to hold back the introduction of variable pay. However, the lender chose to go ahead as the proposal had been cleared by its board. The government has also set up a committee, headed by former Bank of Baroda Chairman and Managing Director A K Khandelwal, to review the human resource policies of public sector banks. Variable pay is one of the issues being discussed. But amidst this, IDBI Bank decided to implement the changes.

Along with the introduction of variable pay, the bank had raised salaries by around 20 per cent. Under the IBA wage pact, salaries had gone up by around 17.5 per cent.

The government managed to convince the management to postpone the introduction of variable pay and the new service conditions in May 2009 saying these required closer scrutiny.