With so much focus on compensation for bank employees, it has gravitated to a global issue, and different parts of the world are responding differently to the problem, as Citibank NA (NYSE:C) and Bank of America (NYSE:BAC) are doing in India, where bonuses are more frowned upon and so the salaries of workers are where the increase in compensation have been going to.
An example of this would be if a worker was being paid the equivalent of $20,000 a year in bonuses. Instead of it being given solely as a bonus, half of it would be added to the base salary of the employee, while the other half would be spread out as what we would consider a regular bonus – in stock or cash.
“Any salary adjustments are not intended to increase total annual compensation, rather to adjust the balance between fixed and variable compensation,” a Citi spokesperson said.
The reason bonuses in general have attracted the attention of politician and the financial media has been because of the perception that is what is causing many bankers to take huge risks in order to generate and trigger the compensation via the bonus pool.
Moving compensation to being part of the annual salary is the way the Indian market has chosen to deal with that particular perception.
The downside to that strategy is you’re also locking in costs by rewarding people no matter how they perform after their salary has been bumped up.
Citibank and Bank of America have said in the Indian market they’re looking a increasing the salaries of their people from between 15-30 percent in 2010.
Like any market, this doesn’t refer only to the regulatory environment, as the banks in India are competing for top employees as are banks across the world. They’re trying to find a middle ground at this time in a hostile regulatory environment.
Even so, India banking, has for the most part been very healthy throughout the recession, and has had access to capital and has remained very liquid.
