PERFORMANCE LINKED INCENTIVE IN BANKS

N.RAJAGOPAL

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 29^th 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 11^th September 2019, decided to discard the proposal of IBA.  In the meeting between IBA and UFBU held on 17^th 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 15^th 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 13^th January 2020 led to a broad understanding between the parties to the concept of PLI. The Memorandum of Understanding signed on 22^nd 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 11^th November 2020 through the 11^th 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
1	<5%	Nil
2	5% to 10%	5 days
3	>10% to 15%	10 days*
4	>15%	15 days*

*3^rd and 4^th 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 2^nd 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.