IFIC Bank

Term Paper On Compensation System of IFIC Bank

Sufiya Khatun Sumi ID:- 11133047 Course Code: 407 Session: 2010-11

JATIYA KABI KAZI NAZRUL ISLAM UNIVERSITY, Trisal, Mymensing.

Acknowledgement

First of all, I extend my profound gratitude to the Almighty Allah, the omnipresent and omnipotent, who helped me accomplish this task on time. I feel satisfied and glad that I have completed this study within specific duration. This term paper might never have been completed without the necessary practical knowledge, assistance of many books, articles, websites, and primary data. It enhanced my knowledge on Compensation System. Thanks to all those persons who have assisted me, providing me co-operation, direction, valuable suggestions & advices to prepare this term  paper.

Finally I want to express my special thanks to Mymensingh Branch, under whom I have completed my term paper. I am also grateful to all other employees and operation Unit of this branch.

ii

Ex ecuti ve Summar y

This study is the result of my term paper placed at the IFIC Bank Ltd. Mymensingh Branch. International Finance Investment and Commerce Bank Limited is one of the first generation banks. It has already developed reputation among the users. The bank operates its all products as the Mymensingh Branch is middle of the city. As a result the branch has to deal with commercial and non-commercial clients. Therefore, the branch has all level of employees of the bank. Since my term paper was directed to understand the Compensation System, I had to gain the  practical area of responsibilities and of accountabilities of the Compensation System so that I could interact with this system. I tried my best to ask the staffs directly and indirectly to gather my information. However, I had a good access to the bank‘s publications. My task was designed to understand the compensation system of the employee of the IFIC Bank Ltd. Mymensingh Branch. For preparing this term paper I used primary and secondary data. We know i n compensation system Human Resource planning organization go for reactive HRP. To estimate future demand and supply of employee’s IFIC Bank Ltd use Managerial Judgment. To forecasting the internal supply of employees they used their own software which is HRIS. For external supply how employees they take fresh University Graduates In the case of compensation system they follow all the process like at first they make a plan then develop a strategy after that they go for searching and screening at last the evaluate the whole compensation system process. For this analysis I, focused on the compensation system practiced  by IFIC Bank Ltd. Mymensingh Branch.

iii

Table of Contents

Content

Page No

1.1 Historical Background of IFIC Bank Limited 1.2 Corporate Slogan 1.3 Vision of IFIC Bank Limited 1.4 Mission of IFIC Bank Limited 1.5 Nature of Business 1.6 Organogram 1.7 Competitive Status 1.8 Workforce at different level 1.9 Salary Structure 1.10 Compensation system (Basic Salary) 1.11 Impact of compensation on employee performance 1.12 SOWT analysis of compensation 1.13 Possible measures to include of compensation system Conclusion Reference

iv

1 1 1 1 2 3 4 5 6 7 9 9 12 13 14

Compensation System of IFIC Bank

1.1 Historical Background of IFIC Bank International Finance Investment and Commerce Bank Limited (IFIC Bank) is a banking company incorporated in the People's Republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/financial institutions abroad. The Government held 49 per cent shares and the rest 51 per cent were held by the sponsors and general public. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The Government of the People’s Republic of Bangladesh now holds 35% of the share capital of the Bank. Leading industrialists of the country having vast experience in the field of trade and commerce own 34% of the share capital and the rest is held by the general public. The Bank is being managed by a group of highly experienced professionals with diversified experience in finance and banking. The Management of the bank constantly looks after customers’ satisfaction and believes that a satisfied customer is a great Ambassador. The bank has already ranked as one of the quality service providers & is known for its reputation. The offers the full range of banking services for personal and corporate customers, covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. All activities of the Bank including its products and services are mainly for different economic groups of Bangladesh at home & abroad. Bangladeshi expatriates living abroad in different countries form a strong economic group who contribute greatly towards the economic development of the country. 1.2 Corporate Slogan Title:  IFIC BANK LIMITED

Logo:

Slogan:

“Your Satisfaction First”

1.3 Visions of IFIC BANK LIMITED To be the best private Commercial Bank In Bangladesh and International in terms of efficiency, capital adequacy, asset quality, sound management and profitability having strong liquidity. 1.4 Mission of IFIC BANK LIMITED

IFIC mission is to provide service to our clients with the help of a skilled and dedicated workforce whose creative talents, innovative, actions and competitive edge make our 1

 position unique in giving quality. Service to all institutions and individual that we care for. We are committed to the welfare and economic prosperity of the people and the community. For we drive from them our inspiration and drive for onward progress to prosperity. We want to be the leader among banks in Bangladesh and make our indelible mark as an active partner in regional banking operating beyond the national boundary. In an intensely competitive and complex financial and business environment. We particularly focus on growth and profitability of all concerned. 1.5 Nature of Business

IFIC Bank Ltd offers full range of banking services that include Deposit banking  Loans & advances facilities  Export and Import facilities  International remittance facilities  Foreign Exchange transactions  Q-Cash (providing both Debit & Credit card facilities).

2

1.6 Organogram of IFIC Bank 2

Source: Annual Report ; http://www.ificbank.com.bd/annual_report.php; 2014

Source: Annual Report ; http://www.ificbank.com.bd/annual_report.php; 2014

3

1.7 Competitive Status

Rank

During the lengthy political turmoil in 2014, while most banks struggled, IFIC Bank Ltd managed to register 93.26 percent profit growth. Such has been the impact of the private bank since he assumed the position of managing director in November 2014. It was possible due to IFIC’s innovative lending policies, where the bank concentrated on providing loans to small and medium enterprises owing to its high recovery rate. The bank provided Tk 8,000 crore in SME loans — more than 50 percent of the total funded portfolio of Tk. 15,000 crore as of March 2013. Strong support from the bank's board members and the bank's Chairman is another reason behind last year's profit of Tk. 307 crore. The bank earned Tk. 96 crore between January and March 2015, returning from the net loss of Tk 99.98 crore in the same period in 2015.

4

Growth Rate

Almost all Commercial Banks operating in Bangladesh are competitors of IFIC as all their activities are concentrated on attracting and serving more customers. The banks try to match each other’s features in order to remain competitive. Below is a schedule of performance of various banks in yearly, 2014 published in the Dhaka Tribune. IFIC held the top position during that period.

Source: http://www.dhakatribune.com/banks/2014/apr/06/most-listed-banks-see-annual-profits-soar

1.8 Workforce at different level Designation Managing Director Deputy Managing Director Senior Principal Officer Principal Officer Senior Officer Officer Probationary Officer

Number of employees 1 1 1 1 2 2 2 5

Junior Officer Asst. Officer/Asst. Cash Officer Trainee Asst. Officer/Trainee Asst. Cash Officer Total

3 2 2 17

1.9 Salary structure of IFIC Bank To evaluate the various components of the total compensation package, the values of cash and non-cash perquisites and benefits have been monetized at current market rates. While computing Annual Bonus, Performance Bonus, which is financial, and Company Products, Transportation Cost have not been taken into account though these have been considered as non-financial Cost to the Company.

The compensation package has been divided into two major segments:  Financial   Non-Financial Financial

Non- Financial Company Leased Accommodation Household Effects Utilities / Maintenance Telephone Company Car  Running and Maintenance Cost Pickup-Drop / Transportation Cost Entertainment Allowance Canteen Subsidy Company Products Club Membership Group Life Insurance Medical Expense Hospitalization Scheme Loan

Basic Salary House Rent Allowance Domestic Aid’s Wage Utilities / Maintenance Transport Allowance Medical Allowance Children Education Allowance Annual Bonus Festival Bonus Leave Fare Assistance Performance Bonus Profit Bonus Incentive Bonus Provident Fund Gratuity Pension Fund PAYMENT FOR TIME NOT WORKED

      

Vacation Holidays Sick leave Military leave Paid rest periods Lunch periods Travel time 6

1.10

Compensation system of IFIC Bank (Basic Salary)

Source: Annual Report ; http://www.ificbank.com.bd/annual_report.php; 2014

7

Level

Designation

Chairmen CEO Top

Mid

Lower

Managing Director Deputy Managing Director Senior Vice President Vice President Senior Principal Officer Principal Officer Senior Officer Officer Probationary Officer Junior Officer Asst. Officer/Asst. Cash Officer Trainee Asst. Officer/Trainee Asst. Cash Officer

Salary

Confidential Confidential 126445 114950 104500 95000 42592 38720 35200 32000 15972 14520 13200

Pay differential with the immediate employee 11495 10445 9500 3875 3520 3200 1452 1320

12000

1200

The bank is committed to follow a fair, competitive and flexible remuneration policy. The  board is the final authority for approval of this policy and will amend and review the policy on recommendation of the Managing Director/ Management Committee periodically. Salaries are confidential between the employees concerned and management. The salary ranges for these job grades are reviewed from time to time. Temporary and outsource staffs do not have any assigned job grade. The contracts get a consolidated payment per month and there are no other entitlements applicable except commission based on job criteria.  Basic Pay: Basic salary ranges (BSRs) is commensurate with the job grades and is determined by the Managing Director. The Board reviews the BSR at least once every 2/3 years. Salary of employees of IFIC at different level Higher Level Mid-Level Lower Level Chairmen Vice Senior Principal Officer - Probationary Officer - Trainee Officer President Officer Confidential - 95000 42592 - 32000 15972 - 12000

8

Asst.

1.11

Impact of Compensation on employee performance

Compensation is output and the benefit that employee receive in the form of pay, wages and also same rewards like monetary exchange for the employee’s to increases the Performance(Holt,1993).Compensation is the segment of transition between the employee and the owner that the outcomes employee contract. As the prospective of employee pay is the necessary of life. The payment receives from work done on the behalf of people getting the employment. From the employee prospective one of the most important  part of cash flow. Compensation is mostly equal to half of cash flow of the companies. But in the service sector it is more than half. It is the major to attract the employee and motivate employee to increases the performance (Ivanceikh and Glueck, 1989). It is argument that mostly individuals that getting higher education they are not satisfied their jobs and their turnover is more than so that organizations are overcome to that problem design the compensation plain to retain the employees as well plays more to attract, retain and motivate to give man power. Different universities objectives make their benefits and compensation packages to attract as possible (HRM Process BPR term report june,2009) mostly employees believe their abilities that knows that if they  perform well pay can be increasing.

1.12

SWOT analysis of compensation system of IFIC Bank

SWOT means overall evaluation of an organization by its activities such as, Strength, Weakness, Opportunity, Threat, now I am going t o discuss about IFIC BANK LIMITED. Strength: There is much Strength in this organization from my point of view, though much strength but I would like to discuss such type of entireties:

9

IFIC BANK LIMITED is the 1st private generation Bank in banking environment in Bangladesh & it provides customer satisfaction within 25 years. Now there are 75 Numbers of Branches in six division .There are 2251 numbers of employees all over the country & contribute of our economy by their hard and soul working, on the other hand 35% share of Govt. Weakness: In my case study, I gathered some weakness in this organization which is very essential to overcome for this organization, such as  New comers in on Banking Employee turnover tendency high

Lack of ATM

Weakness

Most of the employees are not adapted in online Banking

Marketing Policy

Insufficie nt of paid up capital

From my point of view there are many weakness in this organization .paid up capital is not accurate in the rule of Bangladesh Bank .IFIC Bank Limited has 164.00 million instead of 200 million. Newcomer online system, for this reason they are not totally adapted in online Banking ATM Booth is not all over the country, they have not enough marketing team to advertising of their product line.

10

Opportunity:

IFIC BANK LIMITED has a big network to capture the whole items of customer by its aggressive product. Threat: Bangladesh is a third world country & practicing a democracy policy by this policy Bank are affected some hassles ,which is a big threat for a Bank .on the other hand Global recession & Rising of new generation Bank ,New generation bank are provide highest facilities for their customer which is a lack of the IFIC bank limited .

11

1.13

Possible measures to include compensation system

The Human Resources Management system of IFIC is quite good. But the management authority needs to look at some of the major issues like compensation policies, allowances and transfer policies. IFIC needs more man power in the HR department for handling its large number of employees. IFIC should adjust its compensation policies with the industry standards. It should either match or exceed its competitor’s rates in order to attract and retain competent employees. They should also shift from job-based to person-based compensation structure. After all, happy employees will lead to happy customers. Temporary employees at IFIC suffer from job insecurity and instability. They are deprived from the benefits provided to permanent employees. This results in dissatisfaction and demoralization. IFIC should consider providing some benefits to the temporary staff like health care, allowance or other benefits. Teamwork, cooperation and coordination between the employees are of utmost importance to ensure smooth flow of work. Thus, IFIC should take measures to that will foster teamwork amongst the employees. There should be a sense of equity among the employees so that they are willing to work with and help each other out when needed. An employee, who feels that he is underpaid compared to his colleague, will not be willing cooperate with the other employee. IFIC has devised a very comprehensive performance appraisal program in which each employee is given objectives against which his/her performance will be evaluated. For the setting up of these objectives with its work force, the company utilized Management by Objectives. The way these objectives are set is through mutual agreement, where the employees are told exactly what is required of them, how they will be evaluated against each of their objectives and what will be the reward in case if the objectives are met or exceeded. The mutual setting up of these objectives in a participative manner motivates the employee to achieve these objectives as they have a hand in setting them up as well. IFIC should have a time limit, evaluation criteria and clearly defined rewards that will contribute towards motivating the employees to contribute the best towards fulfilling their goals.

12

CONCLUSION

In this Term Paper, we have focused on the Compensation Management system of International Finance Investment and Commerce (IFIC) Bank Limited. We began our report by looking at the history and composition of the Banking Industry of our country. Our banking sector has grown significantly since the liberation war in 1971. The  banking sector plays a vital role in developing a country’s economy. We then took a closer look at IFIC, its background, corporate vision, mission, values, organizational structure, and product and service offerings. We also looked at their current market position which revealed that it is  performing well financially. We then focused our attention on the Compensation Management system of IFIC. We review some of the CM related theories and tried to relate them with IFIC’s practices. During our study, we realized how complex it is to manage compensation effectively. It is difficult to keep all stakeholders happy at the same time. Overall, IFIC’s CM practices are good, but there is much scope for improvements. IFIC needs to adjust its pay policies as there is some dissatisfaction amongst the employees regarding the pay structure. It would be beneficial for IFIC if they implemented some of the recommendations that we have provided from our analysis and understanding.

13

Reference

International Finance Investment and Commerce Bank Limited; 2014; IFIC Profile; http://www.ificbank.com.bd/about.php; 2014-08-02 International Finance Investment and Commerce Bank Limited; 2014; News & Events; http://www.ificbank.com.bd/news.php; 2014-08-04 International Finance Investment and Commerce Bank Limited; 2014; Management Structure; http://www.ificbank.com.bd/management_structure.php; 2014-08-08 International Finance Investment and Commerce Bank Limited; 2014; Human Resource  Development (HRD); http://www.ificbank.com.bd/HRD.php; 2014-08-09 International Finance Investment and Commerce Bank Limited; 2014; Annual Report ; http://www.ificbank.com.bd/annual_report.php; 2014-09-05 http://www.slideshare.net/abidi512/compensation-management-12919427 http://www.dhakatribune.com/banks/2014/apr/06/most-listed-banks-see-annual-profits-soar Selima Begum, Senior Principle Officer, IFIC Bank, Mymensingh Branch.

14