(Source : allbankingsolutions.com)
Background : What Has Happened In Last Three Months or so :
· In a round of discussions that took place between UFBU and IBA on 13-6-2014. (Meeting number 11), IBA informed that the profits of the banks have come down as on 31-3-2014 and therefore they can offer maximum of 11 %( increase of meager 1 % MY emphasis!) on the cost of Pay Slip components of the wage bill. This effectively meant an amount to Rs.3,465 crores (this would be exclusive of other costs on retirement benefits, LFC, hospitalization expenses, etc.)
· Since negotiating unions rejected the offer of 11% increase, IBA wanted to know the expectation of the union. Nine unions informed that their minimum expectation is 25% increase in the Pay Slip components cost. IBA expressed their total inability to accept the same as it is beyond the paying capacity of the Banks. Thereafter there was virtual breakdown in talks and even as on date stalemate continues.
· In the last round of round Talks on 17/09/2014(meeting 12) it is reported ”During the negotiations, IBA informed that the UFBU's demand of 25% increase in pay slip components is on high side and beyond the paying capacity of banks and insisted that UFBU should review its demand, to which UFBU responded as under:
UFBU agreed that it will have flexibility in its demand depending upon the response of IBA on all the above matters’ PROVIDED The other important issues like regulated working hours, 5-day banking, improvements in pension related matters, etc. should be discussed simultaneously and in a time-bound manner. IBA agreed to revert back within a week.
· Thus, as per IBA’s proposal, now next round of talks are due to be held on 26th September, 2014.
Understanding Some Basic Concepts Which Have Already Been Discussed and /or Are in Public Domain
I had already covered in detail as how minimum 25 % hike is absolutely justifiable in my articles as well as synopsis of the article. (Some of these are also available at www.allbankingsolutions.com )
Now before I give practical suggestions to end the present stalemate, let us understand few basic concepts which have already been discussed by UFBU and / or are in public domain:-
Impact of DA merger agreedUnions & IBA agreed for DA merger with Basic Pay at 4440 index points (DA rate as on Nov.2011 – one year prior to expiry of previous Wage settlement) which was the average DA index of Jul, Aug & Sept 2011, a whopping loss of 436 DA index points of one year till October 2012. Which means 10.84% (taken @ 0.10 post merger rate) DA on New Basic is left uncovered from merger as on 1st November 2012.The present DA index is around 5212 (i.e.1303 slabs) less 4440 points(proposed merger) i.e. 1110 slabs (difference of 193 slabs) which would be 19.3 % DA w.e.f. August 2013. If DA is fully neutralized by merger, it would have been a better deal. But Unions failed to ensure DA merger as on the last day of the previous wage Settlement!
Process of merger of DA @ 4440 points as on 1-11-2011 – its impact on pay scales in Banks:
Negotiating Unions and IBA has agreed to merge the DA @4440 index numbers (1960=100) in the basic pay. To understand the merger process let us keep in mind;
In last settlement DA was merged at 2836 ACPIN (1960=100).
1. As on 01.11.2011 AICPIN was 4440.
2. Date of merger is 1-11-2012 (now agreed).So the new merger will be at 4440-2836=1604 points or 1604/4 = 401 slabs.
3. From 1-11-2007- the existing rate at which DA is being paid per slab is 0.15%. The merger will be @60.15% of basic pay (@0.15% per slab *401 slabs)
4. ACPIN on 1-11-2012 is 4876
5. After the merger of 4440 points in Basic pay as on 1-11-2012, 4876-4440 = 436 points or 436/4 = 109 slabs remain .The earlier rate for 109 slabs was @ 0.15%.
In order to balance the merger of DA in Basic pay, the rate for 109 slabs (existing 0.15%) will be scaled down by the same ratio by which the Basic pay has been scaled up.
And the ratio is (2836/4440) = 0.6387
The rate of 0.15%, therefore, converts to 0.10%.
(0.15% *0.6387=0.0958=0.10%) after merger on 1-11-2012
This is how DA rate has been calculated so far in all the previous bipartite settlements.
What is the effect of merging D.A with Basic Pay as on 1-11-2012?
The figures below are hypothetical and explanatory for the purpose of study and have no relationship whatsoever with the actual basic pay and other allowances that may be agreed upon during the course of bipartite settlement.
This is the effect of D.A. merger for the purpose of study.
The wage increase in percentage terms is yet to be decided and any % increase agreed upon will be calculated on New Basic Pay, and not on existing Basic Pay.
All benefits such as HRA, , PF CONTRIBUTION, PENSION, etc., are calculated on the basic pay only.
It is very strange to see negotiating union expressing happiness on IBA agreeing to treat 01-11-2012 as the date of effect of the fresh settlement. As regards the merger of D.A. at 4440 points of ACIPI (Base: 1960=100), IBA has repeated what it had done in 9th BPS.
LET US LOOK AT THE FIGURESWHICH FORTELL TRUTH !
As can be seen only in the 6th bipartite there is full merger of the entire DA in the Basic at 1148 points. This was done to ensure that PF on DA being deducted till such time as part of Pension Settlement dt. 29/10/1993 is nullified and the concept of PF on DA is given go bye.
Further in all the later settlements the DA that was merged was one year earlier to the date of the new settlement. Unions & IBA agreed for DA merger with Basic Pay at 4440 index points (DA rate as on Nov.2011 – one year prior to expiry of previous Wage settlement) which was the average DA index of Jul, Aug & Sept 2011, a whopping loss of 436 DA index points of one year till October 2012. Which means 10.84% (taken @ 0.10 post merger rate) DA on New Basic is left uncovered from merger as on 1st November 2012.
The present DA index is around 5212 (i.e.1303 slabs) less 4440 points(proposed merger) i.e. 1110 slabs (difference of 193 slabs) which would be 19.3 % DA w.e.f. August 2013. If DA is fully neutralized by merger, it would have been a better deal.
But Unions have failed to ensure DA merger as on the last day of the previous wage Settlement! With runaway inflation it may not be a surprise that by the time the wage revision is finalized, additional points would have been added with DA index points(June 2014 it is 615.17 points, projected slabs Aug,Sep,Oct 2014 is expected to be 683 from 650 in May,June,July 2014)
That means we may get DA rate on Basic & Pay as it was prevailing at the end of 9th bipartite settlement! Then where is the wage revision? By agreeing to this cut-off date, IBA has not shown any undue favour to us. They have merely conformed to the age old convention followed at the time of each of the earlier settlements. Therefore, there is nothing to cheer about in this announcement so, in this matter also, there is nothing to celebrate; on the contrary, it’s an injustice.
One can imagine that with around 90% DA rate as on date, with full merger of DA, what would have been the amount that Management would have contributed to PF, Gratuity and leave encashment is any body's guess
The Central govt. employees are demanding merger of DA with Basic once the DA rate crosses 50%. To compensate increasing cost of living 7th Pay Commission has already been announced for Central Govt. Employees (present DA rate is 90% of Basic)! At the present rate of DA@97.50%for Bank Employees.
During 9th bipartite we have seen how SBI employees got 6-7% more than the Commercial Bank Employees! While all 5 workmen Unions signed Bipartite to bind all Workmen Employees. It is exclusively its applicable in SBI only
In view of the fact Bankers that because of poor pay Band, new Recruits are shying away from the Bank job. When all other sectors are marching ahead with sizeable wage packet a paltry wage increase ranging made the Banking sector is an unattractive destination.
THEREFORE RATE HIGHER THAN 0.10% HAS TO DEMDNED.
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Comparative Status of Bank Staff vs Central Government Employees As per 6th and 7th Pay Commission Scales
Monthly Salary of Central Government Staff, at the maximum of the pay scale
S No
|
Rank / Position
|
Total
|
1
|
Multi Tasking Staff
(formerly Group 'D')
|
54300
|
2
|
Lower Division Clerk
|
54530
|
3
|
Upper Division Clerk
|
55680
|
4
|
Class 'B' Officer
|
101360
|
5
|
Class 'A' Officer
|
116310
|
Monthly Salary of Teachers in Central Government Schools, at the maximum of the pay scale
S No
|
Rank / Position
|
Total
|
1
|
Primary School Teacher
|
96780
|
2
|
Trained Graduate Teacher
|
111250
|
3
|
Post Graduate Teacher
|
112860
|
4
|
Vice Principal
|
112860
|
5
|
Principal
|
114010
|
1. Note : Maximum of the scale is in the same time scale, without promotion to the next higher level
2. HRA applicable for centres with a population of 50 lakhs and above have been taken into account
3. For Transport Allowance, all places other than 'A-1' and 'A' Class cities (numbering 13) have been taken into account
4. Children's Education Allowance is paid at Rs.1,250 per child per month, subject to certain conditions
5. Dearness Allowance as applicable from 01-01-2014
Even with 25% hike, our salary will be only 40% of the revised salaries of central government employees, post 7th CPC. Beware! Already central government employees are drawing 40% more. They further enjoy so many other benefits and privileges like fixed working hours, 5 day week, Grade Pay, Very attractive HRA, Transport Allowance with DA, Children’s Education Allowance, Child Care Leave, Paternity Leave, 300 days PL accumulation, Tax free leave encashment at the time of retirement, unavailed Sick Leave getting added to PL if the latter is less than 300 days, CPWD Quarters at many places, automatic pension revision along with each wage revision, CGHS facility at all major towns, preferential admission for their wards in Kendriya Vidyalayas, Privileges of a Gazetted Officer to attest/certify many documents and papers, priority in allotment of rooms in State Guest Houses, Exemption from Perquisite Tax, 20% additional pension after the completion of 80 years of age, additional 30% after 85 years, additional 40% after 90 years, additional 50% after 95 years, additional 100% after 100 years etc.
Where do you fit in here, my dear friends? Remember, these are 6th CPC Scales only.
Even in the ongoing negotiations in the 10 bipartite we find this unhealthy bar the gain trend, against the ethos of true biapartism.
While the unions have reduced their demand from 30 % (see the Hindu business line January, 16, 2014)
IBA a has moved an inch from 10 % to 11 % only during the last round of negotiations on 13-6-2014
Thus, Unions are willing to reduce their demands by 5% on each occasion, but IBA, increases it offer by mere 1% each time.
Bipartite at a glance of award staff only
Additional Per Capita Expenditure on Wages (Workmen)
Annual Wage Increase in Previous Settlements (For Workmen)
Note: This annual increase of Rs. 2,577 Crores is in addition to the contribution by the Banks at Rs. 4,200 Crores (for existing PF Optees) and Rs. 2,100 Crores (for Retired PF Optees) to enable them to join the pension Scheme
Percentage Annual Wage Increase in Previous Settlements (For Workmen)
*before the 8th bipartite computerization increment was settled. We have to add that also with this load
**pension option cost excluded
· Wage load for 9th bipartite was, Rs.2239 crores for officers i.e. 45.91 % and 2577 crores for award staff i.e. 53.5% and Total wage load Rs 4816 cr.
· In other words between 8th and 9 bipartite the increase in wage load for award staff (workmen) was 100.07% i.e. in 5 years
· Applying the similar logic the increase in wage load the initial offer in this 10 bipartite for workmen alone has to be Rs 2577 + 2577= 5154 cr
· Applying the same logic for both officers and award staff if the traditional approach distribution of wage load to award staff and officers is followed as the 9th bipartite pattern the total wage load in rupees for both (workmen and officers )should be minimum Rs8600 cores , which in percentage terms works out to 27.5%
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Critical Issue of Pay Slip Component vs Total Establishment Expenses – How IBA is trying to Befool Bankers
In all the previous settlements salary increase was given a load to total establishment expenses. In these wage negotiations we have been offered on fixed pay components .As against the total establishment expenses of Rs.56292 crores the pay slip component is only Rs.31503 crores.
In other words pay slip component / establishment expense = 55.96%
We shall now explain the concepts pay slip cost and establishment cost on reverse logic terms in the 9th bipartite IBA offered (for award staff) Rs 2577 crores or 17.5% of establishment cost.
Out of which amount allotted to pay slip components is Rs.1514 crores or 10.3 % (apporx.)
Therefore the formulae for conversion factor from pay slip cost to establishment cost works out to 17.5 divided by 10.3, which is equal to 1.70.
Applying the above reverse logic we can construct the following table for easy understanding.
In absolute terms our demand of 25% increase in pay slip components it will work out measly 37.85%%. if we calculate on the difference between IBA offer and unions demand for which stalemate persists it will infinitesimal figure of 22 %, which the bank employees – THE PERFORMING ASSETS assures the Government they will recover from the defaulters no holds barred in express time. That is the reason we aver that our demand is sacrosanct!
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SO WHAT COULD BE A PRACTICAL ROAD MAP TO END THE STALEMATE?
Accordingly A realistic a win- win model which can be end the stalemate, assuming that 25% is an appropriate just increase as demanded by the negotiating unions , which will make sense which will be insensitive to additional wage load in the ‘spread’ is to stagger the increase over a two phases (say from the effective date to … at agreed percentage and thereafter at 25 %) the so as to give banks time to recover and changes in the “spread ‘induced by changes in wags and salaries, interest rates may not be strained, I suggest as under:
1) PHASE I
19.5% hike in payslip component (Rs6104 crores) distributed with appropriate loading after merger of DA @ 4440 points as on 1-11-2011 as agreed at various stages w.e.f 01-11-2012. (11% already agreed upon by IBA the balance increase of 8.5% is only Rs. 2639 crores).
In addition to aforesaid hike w.e.f 01-11-2012 all employees in service as on the date of the settlement shall be paid a temporary adjustment allowance (TAA) equivalent to balance 5.5% (Rs.1721croes) proportionately distributed to appropriate stages (scales) of pay. This TAA shall be a fixed amount without any attendant benefits.
2) PHASE II
25% hike in payslip components( Rs7875 crores ) distributed with appropriate loading after merger of DA @ 4440 points as on 1-11-2011 as agreed at various stages/scales of pay w.e.f 01-11-2013. (11% already agreed upon by IBA the balance increase of 14% is only Rs. 4410crores)from the date of the settlement .Accordingly TAA as mentioned in Phase I shall stand withdrawn.
3) The dearness allowance shall be payable for every rise or fll of 4 points over above 4440poitns in the quarterly average of All India Average Working Class Consumer Price Index ( General) base 1960=100 at 0.15% of ‘pay’.
4) Simultaneously/ Co terminally all the issues listed as Demand number 5 to Demand number 30 submitted by the Workmen Unions in the charter of demands and Part II To Part VI in the charter submitted by Officers Associations to IBA on 31-10-2012 shall be discussed threadbare and amicably resolved .
5) However other core issues such as improvement in Family Pension, updation of pension for retirees , 5 day week ,regulated working hours, specified duties of bank employees etc. shall discussed and amicable understanding shall reached between the parties with in within three months from the date of the settlement.
6) IBA shall suitably recommend to The Government to revise the existing guidelines on allocation to the staff welfare fund from the Net Profit both in relation to profits as well as based on number of employees of the Bank uniformly in all banks as under:
Category
|
Maximum ceiling per year
|
· State Bank of India
|
Rs.200 crores
|
· PSBs with business mix of over Rs. 300,OOO crores and employee strength above 30,000
|
Rs. 50 crores
|
· PSBs with business mix of over 150,000 crores to Rs.300,000 crores and employee strength of 20,000 to 30,000
|
RS. 40 crores
|
· Other PSBs
|
Rs. 30 crores
|
However the respective bank managements after discussions with the union shall suitable arrive at suitable welfare schemes-cash incentive or otherwise to all employees .
Date of effect and operation:
The settlement shall be binding on the parties normally for five years from …. But shall be reviewed and suitably revised after discussion between the parties in respect of matters monetary or otherwise covered under this settlement after implementation of 7th pay commission recommendation to government employees.
Conclusion
With the banks amortizing the cost of VRS 2001 in their balance sheet, the same method can be adopted by banks whose balance sheet are not robust because of heavy provisioning of NPA, to meet the difference between IBA’s offer and unions demand which can be offseted / adjusted with NPA recovered during the amortization period by adapting aggressive steps, is being initiated by banks as instructed by the new government.
If the above suggestions are accepted by parties, the bolstered motivational levels of the employees will provide the necessary impetus in augmenting substantial recoveries of NPA ,& sizeable increase in CASA and steps taken by the new government in respect of giving necessary thrust of financial inclusion and programmes chalked hitherto and bring substantial portion of population in India to have bank accounts, which just revision is bound to have effect.
END NOTE:
Desirability and possibility are two opposite sides of the same coin. What is desirable may not be possible. Spurious desirability and spurious possibility absurd. The line thinking we should have is genuine possibility and genuine achievability. It is in this perspective embracing the tenets of ground realities I have placed the above practical suggestions which I fervently hope if agreed upon will end the stalemate ,pave way or peace and progress of banking industry which the core hub of Indian economy
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