Public Sector Banks - More Bang for the Buck?
The Tax Advantage
The tax rules corresponding to costing of certain perquisites enable significant tax savings. Needless to say, non-monetary rewards like training and paid time off are not taxed at all. E.g. Company provided car: Specifically at senior management, the maximum perquisite value that gets added to taxable income is 2,400 per month. The value of the benefit (depending on the car) is typically much higher. These cost advantages, along with the obvious peopleadvantage of increased engagement, sense of belonging and employee welfare help make benefits a strong differentiating factor for public sector banks.
Pay Practices-Related Challenges
Benefits Administration: Administering benefits in public sector banks involves significant effort, bandwidth and time. One public sector bank has over 30 different policy documents governing benefits. Further, given the large headcount, even the exceptions and special cases for these policies can run into thousands. Automation of benefits administration coupled with use of third-party administrators can help overcome this challenge. Flexibility: A rupee received by an employee in the form of cash may be valued more than a rupee received as benefits, simply because cash offers the employee a choice to spend it as per his or her preference. This challenge can be partly overcome by offering a flexible benefits basket, where an employee can allocate a fixed budget to the benefits he or she values most. Pay for Performance: A rather socialist approach to pay has ensured that there is little incentive for higher performance in public sector banks. On the other hand, approach to job security has ensured that there is little disincentive for non-performance. The absence of both carrot and stick did create an unenviable challenge of performance management for public sector banks. However, positive changes on these fronts are evident with leading public sector banks introducing robust performance management and variable pay plans. Communication: Relational elements of Total Rewards like benefits and non-monetary rewards are less visible than cash. An employee may therefore not always value and appreciate their due worth. Communication of relational rewards as important and valuable element of Total Rewards is essential to help employees understand its value.
The King's New Council
The question that still crops up time and again even in the backdrop of a changing people and pay paradigm, 'Is cash still the king' when it comes to the most impactful rewards mechanism? Perhaps, yes. It will remain to be. However, cash alone may not conquer the war for talent that both new-age as well as traditional companies find themselves enmeshed in. There are many other non-monetary rewards that can and have created an impact across levels. This is what the public sector banks also vindicate. Due to differences in business imperatives and nature of ownership and cost constraints, some of the pay practices may not be replicable for private sector banks. The study of pay practices at public sector banks offers three irrefutable lessons for employers across the board. Firstly, it establishes that welldesigned Total Rewards practices can create a unique differentiator for the employer to attract and retain talent. Secondly, a differentiated approach to pay practices need not necessarily be more expensive. Finally, the effectiveness of such a Total Rewards design can be further enhanced by thoughtfully pre-empting and addressing the challenges faced by public sector peers. Cash may perhaps never go out of fashion and will continue to be the most visible and virulent rewards system that employers use to remunerate their employees. And while cash may be king (of the good times and not so good times) it can certainly work well with its new council of non-monetary rewards to become a formidable fortress that can ring fence top talent and enable companies to remain unscathed as the war for people intensifies in the years to come.
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