OverView of Compensation Management System:

Compensation Management :

Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees.Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.

“Compensation is a systematic approach to providing Monetary rewards [Extrinsicrewards] => Direct ( Salary , bonuses , Incentive ) , Indirect => ( social security ,pensions , insurance , paid leaves { training , sick days ,vacations , holiday , restperiods , Legal advice , Elder care ) & Nonmonetary rewards [Intrinsic rewards]( Job security , Status symbol , Social Rewards ) to employees in exchange for workperformed. Compensation may achieve several purposes assisting in recruitment,job performance, and job satisfaction”-wiki.answers.com

Components of Compensation System

Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on thebasis of certain factors after analyzing the job work andresponsibilities. Components of a compensation system are asfollows:

•Job analysis•Salary structures• Pay structure

Need of Compensation Management

1.A good compensation package is important to motivate theemployees to increase the organizational productivity.2.Unless compensation is provided no one will come and work for

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the organization. Thus, compensation helps in running anorganization effectively and accomplishing its goals.3.Salary is just a part of the compensation system, the employeeshave other psychological and self-actualization needs to fulfill.Thus, compensation serves the purpose.4.The most competitive compensation will help the organization toattract and sustain the best talent. The compensation packageshould be as per industry standards.

Compensation Functions and Services:The compensation office asists and advises managers on theeffective development and administration of the university’scompensation programs. It assists divisional leaders in definingand identifying pay and rewards strategy that meet the uniqueneeds and goals for their individual divisions while adhering tooverall university guidelines. Some specific services include:

Organizational structure and job design, analysis, and evaluation:

1.Conducting in-depth review and determining an appropriateorganizational strucutre and jobs, including type and number ofpositions required to fuction efficiently.2.Defining jobs and establishing the job hierarchy for differentjob families 3.Guiding managers in developing meaningful job descriptions4.Administering the university’s staff job classification system,including the assigning the role, level,salary range, and FLSAstauts of jobs.5.Processing job requisitions for staff positions.

Salary Administration:1.Determining appropriate salary for new hires and current employees based on experience, education/skills, performance, pay history and equity and budgets.

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2.Establishing pay policies and pracice guidelines.

Reward/Recognition:1.Developing alternative pay programs.2.Building reward and recognition programs.

Market Benchmarking and salary increase guidelines:

1.Defining the relevant job market against which university jobsare compared.2.Conducting market analysis to determing competitive pay levelsfor specific jobs, including which staff jobs will require achange in salary range.3.Developing annual salary increase guidelines and salary rangestructure adjustments.

Competitive pay analysis/market reference reports:

1.Supporting recruiting and retention efforts through marketreference reports, which managers can use to ensure pay isequitable, externally competitive and recognizes employeedevelopment, increased contribution and value to the university.

Pay equity studies:

1.Conducting pay equity analysis and studies to ensure thatemployee salaries are determined absent discrimination based onas employee’s race,color,religion,sex,national origin,age ordisablility.

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Performance evaluation and development plan:

1.Defining performance standards and measurements2.Creating development plans that identify and measure an empolyee’s developmental growth in the current job.

Competitive intelligence:

1.Gathering competitive intelligence on pay practices and trends

Legal/regulatory compliance:

1.Assessing impact of relevant laws and regulations on the university.2.Proposing changes to documents, processes, analyses,etc.3.Analyzing compensation-related discrimination and recommending remedies.4.Advising on the legal implications of current and proposed human resources programs,practices and procedures.

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Compensation Management Practices in the Banking sectorof Bangladesh (A case study on

Dhaka Bank Ltd.)

Background of Dhaka Bank Limited (DBL)

Dhaka Bank Limited (DBL) was incorporated as a Public LimitedCompany on April 06, 1995under the Company Act 1994 and startedits Commercial Operation on June 05, 1995 as Private CommercialBank. The Bank started its journey with an Authorized Capital ofTk.1000.00Million and Paid up Capital of Tk.100.00 Million. Todayit is one of the most renowned Private Commercial Banks havingmultiple branches in the major cities of the Country. Dhaka BankLimited (DBL) has started its Business with all the features of aCorporate Bank and the Products of both Corporate and RetailBanking System; to facilitate the daily client tele requirements.DBL is always trying to improve their Customer Services in everysector, but in today’s Competitive Business World, Banks need tooffer additional concentration to the Clients‟ requirements inorder to stay at the top. Therefore, besides dealing with thegeneral attributes of Different Products, they have been tryingto put more emphasis on the Customer Benefits and other Customerrelated Facilities.

Mission & Vision

The Mission of the Dhaka Bank Limited (DBL) is to be the PremierFinancial Institution in the country providing High QualityProducts and Services backed by Latest Technology and a Team ofHighly Motivated Personnel to deliver Excellence in Banking.“The stars in the seven skies sparkle in brilliance and twinkle

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in blissful beauty. We wonder at them in profound admiration andspeculation. At Dhaka Bank we draw our inspiration from thedistant stars. Our team is committed to assure a standard thatmakes every banking transaction a pleasurable experience. Ourpeople, products and processes are aligned to meet the demand ofour discerning customer. Our goal is to achieve a distinctionlike the luminaries in the skies. Our prime objective is todeliver a quality that demonstrates a true reflection of ourvision - Excellence in Banking.” 

Goals of the Bank Long-term Goal:To be the Market Leader both in terms of Deposits and goodadvances among Private Commercial Banks in Bangladesh by the year2009.

 Short-term Goal:To increase Current Market Shares.

 Financial Goal:To reduce the existing Cost of Fund

Values:Customer Focus

Integrity

Team Work 

Respect for Individual

Quality

Responsible Citizenship

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Total Compensation and Benefits Package of DBL Objectives This chapter outlines the rules relating to compensationstructure and the benefit package of the Bank and gives detailedprocedures for exercising them in order to promote fair treatmentand consistency within the organization

Salary Structure

Refer to the Salary & Remuneration Package Structure forSupervisors and Executive Staff of DBL for details regarding thestructure of salary and allowances for different units under DBL.

Revision of Pay ElementsThe compensation structure may be revised, if necessary, with theapproval of the Director, Admin/HR, Head of the Dept., Financeand the Chief Executive.

Employee Compensation RecordsEmployee Pay Records are maintained by the Personnel & AdminDepartment for Workers and Supervisors and by the Human ResourceDepartment for the Executives. These departments maintainpersonal file of all employees where all records in regards tothe employee are kept in addition to any soft copy (in computerdatabase) maintained by the departments. These records areconfidential and should not be accessible to any unauthorizedpersons (authorization defined by HR or Personnel &Admin dept.head).

Basic Employee Benefits for Permanent Employees

Provident FundThe Bank's Provident Fund is a funded scheme. All confirmed andpermanent employees are entitled to be members of the ProvidentFund. The employee contribution, equal to 10% of the basicsalary, is deducted each month through the payroll. The Bankcontributes an equal amount and both the employees' and theorganization's contributions are paid to the Fund each month. In

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the Provident Fund Ledger, both the employee's and the Bank'scontributions are credited to the individual employee's account.The membership of the Trustees of the Provident Fund must includeat a minimum:a)Representation from the HR Department.

b)Representation from Finance & Accounts Department.

c)Two representatives from the Workers.

Group Term Life Insurance

The Bank provides coverage of life insurance to all Permanentemployees after their  joining with the organization effective onthe date of joining. To participate in the Group Term LifeInsurance policy, all employees are required to fill up "GroupTerm Life Insurance Registration Form", and submit toHR/Personnel & Admin dep. for processing. To change thebeneficiary at any time, the employee must complete the“Beneficiary Change Form”, and submit to the Human ResourceDepartment or to the Personnel & Admin dept. for making thechanges.

In the event of the death of an employee while in the bank ‟s service, other than :1)death by suicide, 2) death by criminal prosecution, or 3) deathby taking part in any activities subversive of the state, thebank depending on the classification of employees shall paybenefits on normal death and accidental death from insurance bankas follows:

Employee classification Normal death benefit Accidentaldeath benefit Executives 36 month last basicsalary72 month lastbasic salary.

Detail of compensation other than death (partial disability) willbe determined as per calculation within the purview of insurancecoverage policy. No recovery or adjustments of loans or salaryadvances etc. shall be made from the insurance claim benefits. In

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addition to this coverage of insurance benefits compensation willalso bemade as per "Workman's Compensation Act 1923" in the caseof death/disability of employees.

BonusesAll confirmed Permanent employees of Dhaka Bank Limited are entitled to one AnnualBonus each equivalent to “Basic Salary” under the following conditions:Attendance in the Calendar Year Bonus Entitlement

Meal Facilities:The following facilities are provided in each of the organisationunder Dhaka Bank Limited:Branches 

Executives: Meals are provided at a subsidised rate.

Head Office:Executives: No meals are provided.

Utilities AllowancesExecutives between grades J toM4:No utility allowance ispaid.Executives of grades M5 andabove:

To get reimbursed for

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utilities bills, complete “Expense Reimbursement Form”, andsubmit to the Accounts Department. The Accounts Department willmake reimbursement payment to the employee within 45 days fromthe date of submission. Telephone bill has to be forwarded to theIT department, so payments can be made by the company, if it is inthe name of the Bank.

Medical Benefits

Medical Benefits for the Executive Staff the bank will reimbursethe cost of authorized medical treatments in Bangladesh includinghospitalization, surgical and childbirth subject to theconditions mentioned hereunder. In case of any overseas treatmentprior approval from the Chief Executives required. The followingare the basic guidelines in regards to medical benefits providedto the Executives:

(i) Treatment to be carried out by a registered MedicalPractitioner. The Bank reserves the right to approve the MedicalPractitioner consulted.

(ii) Dental treatment included as preventative measures, the Bankwill reimburse for “Upper and Lower’’ dental cleaning twice ayear.

(iii) Reimbursement of the cost will be restricted to thetreatment of the executive, spouse and children.

(iv) Relevant details including names and dates of birth ofspouse and the eligible children should be sent to HRD forrecord.

(v) Children attaining 21 years of age or getting married,whichever is earlier, will not be entitled to reimbursement ofthe cost of medical treatment.

(vi) Expenditure on medical treatment of Executives is reimbursedby the company as per following entitlements:

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(vii) Expenses Can not be claimed:The Bank will not reimburse the following expenses:

The supply of dentures and false caps. Any cosmetic dental work. The supply of spectacle frames. Special diets except in hospitals under medical advice Treatments not covered under paragraphs (i) and (ii)

  Transportation Facilities and Car Purchase Scheme :

Transportation Facilities for the Executives

Executives DBL Branches: There are no transportation facilities provided for theExecutives between grade J toM4

Head Office: There are no transportation facilities provided for theExecutives between grades J toM4. For business purpose travel,Pool Car can be provided based on availability.

Car Purchase Scheme:

Senior Executives: Employees in this grade, which is Managers, Senior Managers, andVice President, are eligible to apply for a Car Purchase Schemeupon the expiry of one month after the date of joining in theBank. To initiate the request for participating in thisCar Purchase Scheme, the employee is required to write a note tothe HR Department. The Human Resource Department then getsnecessary approvals and then forwards the request to the HeadOffice Admin department. The objective of the scheme is toprovide financial assistance to bank executives for the purchaseof cars and thus to provide executives with transport necessaryfor carrying out their duties. An employee who has acquired a carunder this scheme will not be eligible to apply again for a

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period of five (5) years.

The following are the approved specification of the transport andbenefit given to the employee: 

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Purchase of re-conditioned cars will be subject to inspection onbehalf of the Bank, by the Transport department or by a workshopdesignated for this purpose by them. The car will be checked forengine and body condition, suspension and safety features.The “Automobile Inspection Report” will be completed and signedby the Administration Department for processing the request ofcar purchase. The company, bank or a leasing company may financethe purchase of the car. The car will be initially registered asfollows:

The employee’s 50% contribution towards the cost of the car willbe paid by him to the Bank in equal monthly installments over aperiod of three years if the car is financed by the Bank, or overa period equal to the currency of the loan or leasing contract,as the case may be. If the car is acquired through a leasingcontract or a bank loan, the employee will be required tocontribute 50% of the lease payments or loan installments everymonth until the expiry of the lease period. If the price of thecar exceeds Tk 1,000,000 the employee will pay the amount inexcess of Taka 1,000,000 to the company in cash. The Bank ‟s 50%contribution to the cost of the car will be amortized over aperiod of  five years. After the expiry of this period, or theexpiry of the leasing contract if the car has been leased, or therepayment of the bank loan if the car has been acquired through a

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bank loan, and subject to prior receipt of the final installmentof his contribution, the ownership of the car will be transferredto the employee. Costs incurred in connection with the transferwill be payable by the employees. In the event that the employeeleaves the Bank before the expiry of five years, he shall havethe option to purchase the car from the Bank at the written downvalue in the books of the Bank, plus the total of the unpaidinstallments towards, his own contribution. This option topurchase will only be available to an employee who has been withthe company for a minimum period of two years. In case he doesnot choose to exercise the purchase option, the Bank willreimburse the employee 75% of the amount contributed by him/hertowards the cost of the car, and the car will then remain in orbe transferred to the ownership of the Bank. The employee will beexpected to use the car for the Bank’s business as well asfor fulfilling his private transport needs, including thetransport of children to school, etc. Employees who have availedfor this scheme are expected to meet all their transportationneeds with the vehicle provided under scheme. No other transportwill be provided to an employee who has availed of this scheme.However, if the employee is asked to travel outside Dhaka onBank’s business, he will be re imbursed at Tk. 6/- per km,subject to prior permission from his department head, plus anallowance of Tk. 100/- per day for the driver. Tolls and otherexpenses will be paid at actual. Repairs and maintenance of thevehicle will be the responsibility of the employee. A maintenanceallowance will be paid as explained earlier in this section. Alltaxes, fees, duties, registration costs, and insurance will bepaid by the Bank. The employee must inform the Admin Departmentone month prior to the due date for Fitness/Insurance and theAdmin Department will take full responsibilities to complete thesaid tasks. The Bank’s approval to participate into this schemewill be based on the nature of the employeee’s job and on theavailability of funds with the Bank, at the time when theapplication to join the scheme is made. The employee may chooseto select a car that is presently in the name of the Bank and ifmade available to the employee for purchase. The administrativedepartment will be responsible to identify the market value ofthe car, get approval from the HR Department, and make an offer

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to the employee. For the purchase of the company car, theemployee shall be liable to pay 50% of the market value of thevehicle, in equal monthly installments to the Bank over a periodof three (3) years. All other terms and conditions shall remainthe same. The Management reserves the right to change, modify,amend, cancel or waive any or all of the provisions of thisscheme at its absolute discretion and without any prior noticeand also to withhold or reject any application to join thescheme, without assigning any reason whatsoever.

Top Executives Top Executives of grade M6 and above, i.e. Sr. Vice President andabove are entitled to 24 hourscompany paid transportation. Thecompany also pays for the fuel at cost, Drive’s salary, and forall necessary maintenance/repair and administrative cost of thevehicle.

Leave Entitlements

Basic Leave TypesAll Permanent Executives of the Bank are entitled to varioustypes of Leaves that are calculated based on calendar year andprorated from the date of joining the Bank's service for thefirst year. Leave entitlements of expatriate (Contract) employeesshall be governed by their respective terms of employment withthe company specified in the Appointment Letter. 

For Employees the leave entitlements are calculated in accordancewith "The Shops and Establishment Act 1965, Factories Act 1965and the Factory Rules 1979.These entitlements are as follows:

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Public Holidays for Head Office worker are governed by the policyof the Board of Directors of the Bank and is based on the list ofholidays declared by Govt. For Branch employees, the Managementdetermines the Public Holidays (minimum 10days) and it isannounced at the beginning of the year. 

 

Definitions of Basic Leave Entitlements The following are some definitions of Basic Leaves entitlements:

Casual Leave Entitlement to casual leave for the Executive at Head-Office andBranch Site, it is 15days based on each calendar year. The

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employee is entitled to exercise Casual Leave from the very nextday of joining; though the Casual Leave is pro-rated forthe balance period of the year counting from the joining date.Casual leave cannot be availed for more than three days at atime. Also, it cannot be carried forward to the following year orcashed. Casual Leave can be taken with Weekends, Public Holidays,Earned Leaves, etc. but be limited to only 3 days.

Sick Leave

Entitlement to Sick Leave for the Executives at Head-Office andBranch Site it is 15days on the basis of each calendar year. Theemployee is eligible to exercise the Sick Leave benefit from thedate of his/her joining. The above entitlements represent themaximum number of days Sick Leave that an employee can avail in ayear. Normally, medical certificates are not required but if thesick leave exceeds three days at a time or if it is being takenas an extension of Earned Leave, then a Medical Certificate isrequired. Where this is not the case an application for SickLeave is considered enough. Sick leave cannot be carried forwardto the succeeding year and cannot be cashed. If an employee issick on Weekend or on a Public Holiday, that day will not becounted as a sick day and the number of Sick Leave taken out ofhis/her allocated days will be excluding those days.

Earned Leave Entitlement to Earned Leave for the Executives at Head-Office andBranch Site is 15days on the basis of each completed year ofservice. A maximum of thirty (30) days can be accumulated. Anyaccumulation beyond this will automatically lapse on thefollowing 1stof January each year. The entitlement to EarnedLeave is exclusive of Weekends and Public Holidays i.e., Weekendsand Public Holidays falling during the annual leave taken will beconsidered additional to the entitlement. Though Earned Leave iscounted from the date of joining but it cannot be taken until theemployee passes the probationary period receiving confirmation.

Other Leave Options The following sections explain some additional leave options that

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an employee mayexercise depending on the need.

Maternity LeaveMarried woman employees are entitled to Maternity Leave benefitas per "The Maternity Benefit Act, 1939". The period of MaternityLeave shall be 84 actual days of absence which shall include thePublic Holidays and Weekends (non-working days) and including theday of delivery. The entitlement to maternity leave is to beavailed as follows:

Six weeks or 42 days immediately preceding and including theday of delivery. Six weeks or 42 days immediately following the day of delivery. A woman shall not be entitled to maternity leave unless she hasbeen employed by the Bank for a period of not less than ninemonths immediately preceding the date of delivery.

Study LeaveAn Executive may be granted Study Leave, with or without pay,entirely at the bank’s discretion, once s/he has been in the bankfor at least one year. Study leave is normally granted if thecourse of study which the employee intends to pursue is likely tobenefit the Bank’s operations. Study Leave can be given for up toa maximum period of two years.

Hajj LeaveA Permanent Executives who intends to perform Hajj at his ownexpenses, upon completion of one year of service, may be allowedfor a 45 days Hajj Leave with pay at the sole discretion of themanagement. This leave can only be availed once in the entireperiod of service. Similar leave may be granted for employeesother than Muslims, if the occasion is a once in a life time holyevent significant to the believers.

Special LeaveSpecial leave may be granted to the Permanent or Contractemployees with or without pay and allowances at the solediscretion of the management. Application for special leaveshould be forwarded to HR/Personnel department, through the

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relevant departmental head, along with appropriate reasons andrecommendations for necessary action. Some examples of such leaverequest may be for marriage, death in the family, etc.

Leave EncashmentExecutives before leaving the Bank due to resignation, retirementor termination are allowed to cash the Earned and CompensatoryLeave due to them up to a maximum of 30 days, while for workersit is 20 days plus the prorated entitlement for the current year.The amount paid on encashment includes only the employee's lastdrawn basic salary for the period. Allowances are not included inthis amount.

Maintenance of Leave RecordsApproved leave applications received from departments are enteredin a Leave Register and the lower portion of the leaveapplication showing the balance of leave is sent to the employee.Leave records for all Executives and Head Office Staffs aremaintained by HR Department.

Financial Assistance Schemes

ObjectivesTo meet various emergency and incidental expenses, the Bankprovides financial assistance in the form of advance payment ofsalary and loan against provident fund to its employees. Thefollowing sections give detailed procedures for salary advancesand loan sanctions under Financial Assistance Schemes.

Priorities for Loan against Provident Fund (PF) or Salary AdvanceThe following priorities will be maintained for PF loan or salaryadvance request processing:

1.Medical emergencies for spouse or children

2.Death of Spouse or children

3.Medical emergencies for other dependent

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4.Death of other dependent

5.Rental advance6.Own marriage

7.Other emergencies

8.Marriage of siblings

9.Education

10.Other requirements

Loan against Provident Fund (PF) or Salary Advance Eligibility and Limits

Loan against Provident Fund

1. All Permanent employees who have contributed to atleast18installments in the Contributory Provident Fund of Dhaka BankLimited and have been in the Bank for less than 3 years, areeligible to take loan against the provident fund equal and up to75% of the employee’s own contribution. 2.All Permanent employees who are members of the ContributoryProvident Fund and have been in the Bank for more than 3 yearsbut less than 4 years, are eligible to take loan against theprovident fund equal and up to 100% of the employee’s owncontribution.

3.All Permanent employees who are members of the ContributoryProvident Fund and have been in the Bank for more than 4 yearsbut less than 5 years, are eligible to take loan against theprovident fund equal and up to 70% of the total contribution(employe’s own contribution + Bank’s contribution). 4.All Permanent employees who are members of the ContributoryProvident Fund and have been in the Bank for more than 5 years

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are eligible to take loan against the provident fund equal and upto 75% of the total contribution (employee’s own contribution +Bank’s contribution). 

Salary Advance Salary Advance is given only in those situations where thePermanent employee does not have enough contribution to theProvident Fund but the urgency is very high. Usually one month’saverage gross salary is given as advance but based on theemergency; a maximum of two months salary can be given asadvance.

Repayment of Loan or Salary Advance One month’s grace period is given to the employee before therepayment starts. The employee, through automatic deductions bythe Accounts Dept. from his/her Pay-check, makes the payment. Thefollowing are some guidelines for repayments:

1. If financial situation permits, the employee is asked to paythe money back with 6equal monthly payments.

2. If the financial situation does not permit, the employee isgiven the opportunity to pay back with 12 equal monthlyinstallments.

3. If the amount of loan is large and the repayment imposeshardship on the employee, it may be considered to extend therepayment schedule to a maximum of 24 equal installments. Insuch cases, the Department Head of the employee mustrecommend the accounts department to do so.

4. If the loan or advance is related to medical payments andthe employee is eligible for medical benefit, theadvance/loan will be applied towards the eligible benefitonce the treatment is received. Upon receipt of all medicalvouchers, the employee is required to submit “Medical BillsReimbursement Form”, as per guidelines provided in Section6.12.2 and apply the advance/loan towards the refund. Anyexcess amount taken as advance/loan must be paid back

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immediately after the treatment is over. 

Procedures to Apply and Processing of a Loan or Salary Advance Request

The employee completes a “Loan Application Form”, and uponreceiving an approval from the Department Head, submits to theAccounts Department. The Accounts Dept. personnel review theapplication, discuss with the employee if necessary, and let theemployee know about the outcome. At the time of processing theloan/advance request, the Accounts Dept. identifies the repaymentagreement discussing with the employee.

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Appendix:

1. www.dhakabankltd.com2. http://www.scribd.com/doc/52465009/Compensation-

System-of-DBL3. www.google.com 4. Mr. Sohel Akhand, Vice President, Dhaka Bank Ltd.

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