Cases

Review of Compensation Structure for a Multinational Bank

Background and Challenges

The client wanted to setup a new compensation model as part of a post-merger integration exercise. However, the following questions continued to haunt the leadership in India and the Bank’s Group worldwide:

  • What should be the Compensation philosophy in India?
  • What would be the most effective and efficient compensation delivery model?
  • Should it be different for each business?
  • How will this impact the support units?
  • What proportion of total cost should be paid at risk?
  • What proportion of total cost should be paid at risk?
  • Is the compensation strategy driving preferred behaviours?
  • What should be the benchmarking philosophy? Which industries?
  • How should the efficiency and effectiveness of compensation and reward strategy be measured?

Hence, a compensation review exercise was initiated to address the above strategic questions.

Approach and RecommendationsResults

As part of the compensation review exercise, UC reviewed the following:

    • The rationale for the current compensation structure and its drivers

      1) Compliance with local laws (Gratuity and Provident Fund Act)

      2) Need to provide a tax efficient compensation delivery mechanism

      3) Need to align to local market and Bank’s Group practices worldwide

    • Conducted internal analysis by business and levels to understand the following

      1) Headcount and people profile (Count and Leverage Ratios)

      2) Total Employee Cost (TEC) break-up

      3) The utilisation of various elements of allowances, benefits, variable pay coverage etc.

    • Conducted a benchmarking exercise with the following:

      1) Local market practices with respect to quantum, structure, methods and policies

      2) Prevalent practices and structure of the bank’s group world-wide

    • Assessed bank’s positioning vis-à-vis the market and bank’s group world-wide and identified issues
    • Identified alternative solutions and conducted ‘What-If’ scenario analysis for each issue
    • Evaluated each scenario on the following parameters

      1) Financial impact of each scenario

      2) Impact of the bank’s competitive positioning vis-à-vis the market

      3) Impact of the scenario on employee morale and retention of talent

      4) Cost of administration, ease of implementation etc.

Results

UC designed the compensation philosophy and obtained buy-in and sign-off from key stakeholders.