Banks, insurers seen going slow on pay hikes

Tuesday, 06 May

Mumbai: Caution will be the buzzword in the banking, financial services and insurance (BFSI) sector this year, as far as increments go. Or, so the indications are, so far.

ICICI Bank, the country’s largest private sector bank, issued a letter to its employees last week stating that the organisation would effect a “realignment” of cost structures and wages in this year of “stable and robust growth.” And now, other banks appear set to tone down increments, too.

“Appraisals will happen, but will be a little less than the 18-20% that was doled out last year,” says the human resource manager of a private sector bank.

But, of course, no company is likely to play Scrooge by chopping off promotions or appraisals drastically, despite the slowing economy and high interest rates, feel HR consultants. The war for talent is nowhere near cooling down yet.

E. Balaji, chief executive officer of HR consulting and recruitment firm Ma Foi Consultants Ltd, said, “Generally, players tend to follow the leader. But in this case, though companies will take a conservative stance, there won’t be any sudden reduction in increments or promotions.

Organisations are bullish on the people front and perceive compensation as a strategic lever in attracting and retaining talent. ICICI is the leader amongst private banks and hence it can afford to not be aggressive on promotions and increments. A decision like this can trigger attrition at the junior level.”

Attrition is a good 20-25% per annum for the larger players in the banking industry.

Subhro Bhaduri, executive vice-president, human resources at Kotak Mahindra Bank said, “Though we have taken a cautious approach, we have nevertheless given promotions wherever necessary. Our average increments this year will be in the range of 13-15%.”

Kotak, which has about 9,000 plus employees, does not have any plan to slow down hirings. Going by Bhaduri, it will hire around 4,000-5,000 people at various levels this year.

S. Bhattacharya, president HR at Axis Bank, said, “ICICI’s decision can soften the market in terms of pay hikes. But we are not cutting down on our hikes and increases this year would be normal, in the range of 13-15%.”

On the flipside, he said ICICI’s decision can trigger attrition in that bank to a certain extent and this can increase supply in the market, thereby reducing the bargaining power of those looking to quit and take up other jobs.

ICICI Bank, with an employee base of over 40,000, is one of the largest recruiters in the private sector, inducting approximately 15,000 people each year. But this year, the bank feels little need to recruit either internally through promotions or externally in an aggressive manner.

However, about 2,500 campus recruits and 1,000 from ICICI Manipal Academy are expected to join the bank this year.

Kris Lakshmikanth, founder CEO and managing director of Bangalore-based HR firm HeadHunters India Private Ltd points out that increments for key performers at ICICI in the past have even been a whopping 100% of basic salaries.

“ICICI may have effected a tight purse as it has one of the largest exposures to overseas assets. It is also their way of telling employees that last year was good, but this year won’t be the same, and thereby arrest unnatural expectations of employees,” he said.

The bank had about $2.2 billion worth of exposure to credit derivatives, and though it has not directly invested in the US market, it has taken a beating due to the depreciation in the value of securities in the global markets, say HR experts.

Meanwhile, the insurance sector, which is grappling with annual attrition as high as 50% in the sales division, and 20-25% in the non-sales divisions, is also seen going slow on increments.

Priya Ranjan, director-HR at Bharti AXA Life Insurance, said, “Last year, the insurance sector witnessed increments to the tune of 14-15%. This year, we will give increments to the tune of 16%, but I think there will be many players who would give much less.”

R. Krishnamurthy, MD (distribution consulitng) of Watson Wyatt, an HR consulting firm for insurance and financial services, said, “ICICI Bank’s decision is a good move to consolidate the frenzied movements in terms of salary hikes that had crept into the BFSI sector. Players will act in a responsible manner, taking stock of the economic situation, and bringing in moderation in pay hikes.”

“The financial services sector could see hikes in the range of 10-15%. This will be the case with insurance also,” he added.

Source: DNA