Is performance linked salaries in public sector banks a feasible option ?

There may be a performance-linked variable component from the next year financial year in the salary packages of employees of public sector banks. The Indian Bank Association (IBA) is still negotiating with employee unions to include the performance variable pay in the pay packets, which is expected to be around 25-30% of salary. This proposal will affect the compensation structure of nearly 7 lakh employees of state-owned banks.

The government is certain to include a variable component in the salaries of new recruits very soon. Nearly one-third of the employees are set to retire in the next two fiscals. The finance ministry has already appointed a panel headed by former Bank of Baroda chairman AK Khandelwal to look at ways to professionalise the human resources practices at public sector banks.



But the question is what will be the criterion of deciding performance of especially for those who directly do not contribute to income of the bank. Even the present performance appraisal system in PSU banks lacks the objectiveness as compared with the private sector.

Need of the hour is to first have a proper appraisal system before adding performance-linked variable component in salary.

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