The introduction of Performance Linked Incentive (PLI) in the eleventh bipartite settlement has been a point of contention among the unions and associations. The bank managements led by Indian Banks Association somehow managed to introduce this concept.
PLI is not a demand from UFBU but a counter demand of the IBA. It was during the negotiations held at Mumbai on 27 10 2017, IBA placed its counter demands. Among various others, it said “For Officers, Performance related variable pay method to be introduced”. UFBU stated that “While we are for better performance, efficiency, more productivity etc., any differentiated wage compensation will result in subjectivity, unilateralism, discrimination and may become demotivating and counter-productive”.
UFBU discarded IBA’s proposal
Yet again, IBA in its discussions with UFBU held on 29 09 2018 and 12 10 2018 reiterated “The proposal of linking wages to operating profits, return on assets and performance of employees/officers”. This was again rejected by UFBU. This counter demand of IBA stems from the concept of bank-wise wage settlement instead of industry-wide wage settlement. It may be noted that the uniform wages in the banking sector has evolved over decades starting from 1948 (Sen Award). It was during the discussions between IBA and UFBU held on 29th August 2019, IBA laid discussions on Performance Linked Pay (PLP) as a precondition and wanted to constitute a small committee so that other issues on wages and connected matters may be discussed. The UFBU in its meeting on 11th September 2019, decided to discard the proposal of IBA. In the meeting between IBA and UFBU held on 17th September 2019 in respect of Performance Linked Incentive, IBA submitted a power point presentation. They proposed that PLI would be over and above the fixed increase and will be different from bank to bank on the basis of performance and will be paid on yearly basis with prospective effect. The employees and officers opposed such move of the IBA through their active participation in all the organizational actions.
In-principle approval given
In the meeting held between IBA and UFBU on 15th November 2019, UFBU gave an in-principle approval as majority of the constituents (except BEFI) were in agreement to discuss introduction of PLI in banks. UFBU came out with a suggestion to introduce PLI as a separate agreement. IBA in turn informed that the scheme of PLI would be applicable to Public Sector Banks and optional for private sector member banks. Thus IBA could introduce its counter demand on a crucial aspect, which may be game changer in the days to come.
The discussions on 13th January 2020 led to a broad understanding between the parties to the concept of PLI. The Memorandum of Understanding signed on 22nd July 2020 between the IBA and UFBU excepting BEFI included Performance Linked Incentive as per a proposed matrix of individual bank’s performance and made applicable from FY 2020-2021. This was reduced to writing on 11th November 2020 through the 11th bipartite settlement between IBA and UFBU excepting BEFI. Accordingly, the employees of each bank shall get incentive depending on where the matrix that particular bank’s performance fits in.
|Sr. No.||YOY Growth in Operating Profit||No. of days for which Salary (Basic + DA) shall be paid|
|2||5% to 10%||5 days|
|3||>10% to 15%||10 days*|
*3rd and 4th slabs are payable only if the Bank earns Net Profit. If a Bank has growth in Operating Profit of 5% & more, but there is no Net Profit, then minimum 2nd slab of 5 days will be payable.
How PLI creates division among employees
The opposition to the introduction of Performance Linked Incentive in the industry level settlement is for many reasons, some of which are: i) it will distort the unique character of earlier settlements; ii) it will not be uniform over the whole tenure of a settlement; iii) performance/result of a bank depends on the extant accounting norms adopted by the regulators; iv) as the performance is calculated on change in y-to-y basis there is an ample scope of not getting any incentive; v) once bank specific facility is accepted, it may lead to bank level agreement in future; vi) in a service sector like bank, any pay/incentive should not be linked with performance of a bank or an individual employee/officer and vii) may encourage the managements to ignore collective bargaining.
Through PLI, the XI bipartite settlement had created a division among the employees of different banks. Subsequently, it may lead to difference of pay and wages between individual employees of the same bank. There is a danger that the uniformity of pay and wages of bank employees achieved till now may become a history of the past. Bank men are not happy with such discrimination. Instead they want bonus to all in lieu of PLI.