Private banks explore new benefit packages to retain staff
MUMBAI: With the banking sector witnessing high attrition rates, private sector lenders are looking at new compensation and benefit packages to retain employees.
HDFC Bank’s board, for instance, approved ₹100 crore restricted stock units (RSU) at ₹1 each for mid- to junior-level employees as part of their compensation structure. It will offer one or more shares to an employee at a future date if certain conditions, such as a pre-defined service period, are met, or may be linked to their performance.
Unlike for employee stock options (ESOPS), employees will not have to pay to get an RSU,
but they will have to pay the applicable taxes to get the shares. The management said the employee stock incentive plan will be relatively less dilutive and help trim attrition.
“RSU is similar to ESOPS, but comes at a deep discount, and the number of RSUS will not have any impact on the bank. If
the bank was to grant three ESOPS at a fair value of ₹500 each, the employee gets ₹15,000. In this case, if 1 RSU is given, the total compensation will be ₹1,500 and would avoid shareholder dilution to some extent,” Srinivasan Vaidyanathan, chief financial officer, HDFC Bank, said. “It is intended for mid and junior management up to 10 levels below the CEO. “It would be part of the compensation structure. 75% of RSUS will be for personnel 6-10 levels below the CEO. It is going to lower the attrition significantly and will bring enormous levels of productivity. We wanted to make employees shareholders and get them to participate. The approval is for four years and the vesting period is five years.”
Kotak Mahindra Bank, too, has been offering stock appreciation rights—a bonus linked to the performance of the stock price—to its employees. “In the last 6-8 months attrition levels have been rising. This is not restricted to the banking industry. Companies have started hiring and people are moving to locations of their choice or with flexible roles. In banking attrition is steady at the double digits, however in some verticals and functions it is in the range of 20-30%.” said Sukhjit S Pasricha, group chief human resource officer, Kotak Mahindra Bank.
The moves by HDFC and Kotak have got other banks thinking.
“...RSU is a great way to create value for employees. But will younger employees see value in this, is the key question, especially since there is a tax implication. I’m not too sure,” said a senior banker with a private sector bank.
Since September, banks have been cutting down on ESOP after Reserve Bank of India asked banks to recognize it as expense in profit and loss account. Bankers are now exploring if RSUS could replace ESOPS to retain mid and junior management.