Here's why the staff at India's government banks are not happy with the salary hike ahead of the festive season

Bankers are getting an extra one month's salary but this could end up shifting their tax bracketBusiness Insider India

  • The Indian Bankers Association (IBA) has decided to distribute one month’s extra salary to public sector bank employees.
  • The bank unions are unhappy that they were not consulted on this decision despite ongoing negotiations around wage revision.
  • Some bankers are also unhappy with the move since it means paying more income tax.
Public sector bank employees in India are owed a wage revision from two years ago. Instead of the much awaited hike, the Indian Bankers Association (IBA) decided to dole out an ad hoc amount of one month’s salary.

New salaries for employees in public sector banks have been due since 1 November 2017.

Negotiations were initiated in June 2017 and in the last meeting, which took place on 17 September 2019, the negotiating committee proposed a 12% hike in wages — but no conclusive agreement has been reached yet.

In the interim, banks’ staff will get a raise, meant for the entire year, and this will be equivalent to a month’s salary along with a 12% hike, according to documents seen by Business Insider.

This payout has been timed such that employees have additional cash ahead of the key festive season of Diwali and Dussehra.

Any bank employee who joined after 1 November 2017 will only be getting an ad hoc amount equalling to 15 days’ salary.

Bank unions unhappy with decision

All India Bank Officers' Confederation (AIBOC) isn’t happy with the IBA’s decision to compensate by giving out a month’s salary. They claim that they were not consulted on this decision.

The IBA’s decision to disburse an ad hoc “undermines the very existence of trade unions” and “underestimates the quality and character of bank employees,” according to the AIBOC in a statement.

The arrears were distributed as scheduled on 4 October 2019 by the State Bank of India (SBI), Bank of Baroda (BoB), Punjab National Bank (PNB) and UCO Bank.

Other banks distributed the ad hoc arrears one day later. Due to the union’s reaction, these banks decided to give bankers the choice to opt in or opt out of accepting the arrears. This takes the responsibility for the ad hoc amount off the bank’s plate and on to individuals.

The bankers conundrum

It should be noted that these arrears are not bonuses but will be adjusted against the actual payable amounts after the outcome of the ongoing wage negotiation talks.

The ad hoc wages will also be adjusted for income tax and other statutory deductions.

This could complicate matters for staffers and officers who did not fall into the taxable income bracket before the addition of the ad hoc amount, but will now be subject to income tax.

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