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COMPENSATION

SYSTEM OF HMB
Compensation Management
A Project on Compensation
Management System Of

HABIB
METROPOLITAN BANK
(A Subsidiary of Habib bank AG Zurich)
Date of submission:
December 13, 2016
Submitted by:
Muneeb Ijaz # 09
Wali Khan # 31
Moin Rasheed # 36
Hijab Riaz # 42
Humaira Liaqat # 47

Introduction
History & Introduction
COMPENSATION
SYSTEM OF HMB
Habib Metropolitan Bank was incorporated in Pakistan as a Public Listed Company
in 1992 under the name, Metropolitan Bank Limited. The Bank commenced, duly
licensed, full scheduled commercial-banking operations in October 1992.

Metropolitan Bank, from October 1992 to September 2006, remained a highly rated
bank and, vide its nationwide 51-branch on-line network, established as a
distinguished provider of trade finance services.

On October 26, 2006 Habib Bank a G Zurichs Pakistan Operations merged into
Metropolitan Bank Limited and the merged entity was named Habib Metropolitan
Bank Limited (HMB). Demonstrating a strong commitment to Pakistan economy,
HBZ is the principal shareholder of HMB.

HMB operates in all major cities of the country. The Bank ranks within Top 10 in
Pakistan with a strong vision to be the most respected Financial Institution. HMB has
its primary focus on retail banking and trade finance and also offers highly innovative
E-Banking solutions and Consumer Banking to its customers. The Banks Islamic
Banking Division is fully capable of catering to customers seeking Shariah compliant
products.

The HBZ Group is heir to a rich tradition of banking and commerce dating back to
more than 160 years. The groups flagship and HMBs principal, HBZ (incorporated
1967) enjoys International ranking of 687 in terms of capital. With Headquarters in
Switzerland, the HBZ Group also operates in Hong Kong, Singapore, United Arab
Emirates, Kenya, South Africa, United Kingdom and North America.

The Pakistan Credit Rating Agency (PACRA) has allotted both long-term and short-
term ratings of Habib Metropolitan Bank Limited at AA+ (Double A plus) and A1+
(A one plus), respectively. These ratings, being the highest amongst the local sector
Private Banks, denote a very low expectation of credit risk emanating from a very
strong capacity for timely payment of financial commitments.

Vision Statement
Based on a foundation of trust, to be the most respected
financial institution, delighting customers with excellence,
enjoying the loyalty of a dedicated team, meeting the
expectations of regulators and participating in social causes
while providing superior returns to shareholders

Mission Statement
"The Mission of the Habib metropolitan Bank is to foster a sound economic
and financial environment which promotes the development of its stakeholders
and encourages a culture of excellence and leadership."
COMPENSATION
SYSTEM OF HMB

PACRA MAINTAINS RATINGS OF HABIB


METROPOLITAN

BANK LTD. (HMB)


The Pakistan Credit Rating Agency (PACRA) has maintained the long-term
and short-term entity ratings of Habib Metropolitan Bank Ltd. at AA+ (Double
A plus) and A1+ (A one plus) respectively. These ratings denote a very low
expectation of credit risk emanating from a very strong capacity for timely
payment of financial commitments. The ratings reflect the strong position of
the bank in its respective niche self-liquidating trade finance to corporate
and SMEs. While consolidating its strength, the management continues to
focus on product innovation, enhanced reach through network expansion,
and technology up-gradation for ensuring quality services to its customers,
thereby retaining its relative positioning in the face of intensifying
competition within the sector. The bank continues to maintain outstanding
asset quality an outcome of conservative risk appetite as well as effective
risk management. The ratings also take into account the banks association
with a geographically diversified international sponsoring group Habib Bank
AG Zurich (HBZ).

About the bank: HMB, commencing operations in 1992, is listed on all bourses
of Pakistan. Subsequent to recent merger, the bank is a 51% owned
subsidiary of HBZ, incorporated in Switzerland. HBZ, with consolidated assets
of above US$6bln, has operations in eight countries directly and through
subsidiaries. This provides inherent strength to the bank given high credibility
and standing of HBZ. The Chief Executive of the bank is a former Governor of
the State Bank and also a former president of Habib Bank Limited, one of the
largest banks in the country. A highly professional team of senior executives
including the executive director, who has emerged as the key professional
in evolving the banks strategy as well as its implementation, assists the
chief executive. The primary function of PACRA is to evaluate the capacity and
willingness of an entity to honour its obligations. Our ratings reflect an
independent, professional and impartial assessment of the risks associated
with a particular instrument or an entity.PACRAs comprehensive offerings
include instrument and entity credit ratings, insurer financial strength ratings,
fund ratings, asset manager ratings and real estate grading.
COMPENSATION
SYSTEM OF HMB
PACRAs opinion is not a recommendation to purchase, sell or hold a
security, in as much as it does not comment on the securitys market price or
suitability for a particular investor.

HIERARCHY CHART

General Manager

Regional Manager

Branch Manager

Branch Credit Committee Internal Auditor

Credit Department
Customer Service DepartmentGeneral Banking

Account Opening Department

Cash Deposit Department

Foreign Exchange Department

Bills Remittances Department

Clearing Department

HABIB METRO ORGANIZATION CHART


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SYSTEM OF HMB

Achievements
These above credit ratings denote

HMB is one of the top ten banks in Pakistan


A very high credit quality,
COMPENSATION
SYSTEM OF HMB
A very low expectation of credit risk and
A very strong capacity for timely payment of financial commitments.

Corporate Information:
Board of Directors
Chairman & President
Kassim Parekh

Chief Executive
Anjum Iqbal

Directors
Muhammad H.Habib

Raza S. Habib

Bashir Ali Muhammad

Anwar H. J apanwala

Ronaid V. Emerson

Firasat Ali

Mohamedali R. Habib (Executive Director)

Audit Committee
Reza S. Habib

Kassim Parekh

Mohamedali R. Habib

Company Secretary
Muhammad Imran

COMPETITORS:
Arif Habib Bank
MCB
Bank al Habib
National Bank of Pakistan
Bank Alfalah
COMPENSATION
SYSTEM OF HMB
Standard Chartered Bank

Job analysis in HMB

Human Resource Department at HMB

Very active and one of best HR department in Pakistan.


HR of HMB is also working on Strategic planning of HMB
Diversification Strategy
Geographic expansion strategy
Functional Strategy
Opening and closing phase of HMB recruitment
Media Sources used for External Hiring
HMB uses outside sources for recruitment which are:
1. Newspapers (Daily Jung, Nawa-e-Waqt, the Nation, Dawn and
Daily Khabrein etc.)
2. Trade and professional journals (Aurora Magazine)
3. Internet job sites (rozee.pk)
Outside sources of candidates:
1. Sidat Hyder Morched Association works for outsourcing for HMB.
2. College recruitment
3. Employee referrals
4. Walk-ins

Job Analysis at HMB


In HMB job analysis conducted through these sources

The interview
Individual employees, group of employees and supervisors with vast
knowledge about jobs are interviewed.
Questionnaires
In questionnaire the employees fill out questionnaires to describe their
job related duties and responsibilities.

After getting information about specific jobs analysts document these


two documents:
Job Description
After getting job analysis information the next step is to describe job
description which contains the points of job identification.
Job Specifications
COMPENSATION
SYSTEM OF HMB
After formulating job description the next step taken is job
specification in which the traits of employees are defined who are
assumed suitable for the job at HMB.

Human Resource Manual of HMB Contains Five process


Selecting and Recruiting
Training and Development
Performance Appraisal
Compensation
Employee relation

Selecting and recruiting process according to HMB


Analysis of Position and Recruitment
Identify Candidates
Pre Screening and Short Listing
Vacant Positions
Develop Candidate Database
Recruitments and Selection Monitoring,
Training and Development Test / Interviews
Final Selection
Analysis of positions and requirement:
After planning it is analysed that which position is going to be filled
and the requirement is analyse by job analysis.

HMB identifies its candidates by developing the criteria of job


description and job Specification and by Outside Sources
Finding internal candidates:
Job Postings
Rehiring former employees
Pre-screening and short listing:
Selection board goes through those CVs and selects those
candidates which initially fulfil the criteria of selection board. After pre-
screening selection board short lists the candidates who are
considered most suitable for job at initial level on the basis of their
resume.
Test/ interview:
In this process short listed candidates are called for test and
interview according to nature of their applied jobs.
Selection interview.
Formats used in selection interview:
Structured/Directed
Unstructured/Non directed
Modes of Interview:
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SYSTEM OF HMB
Penal interview
Structured sequential interview
Types of questions:
Situational
Job Related
Stress
Puzzled Questions
Final Selection:
After going through all the processes the best candidates according
to HMBs selection boards are selected.

COMPENSATION SYSTEM OF HABIB METROPOLITAN BANK

HMB`s focus on attracting, developing and retaining their employees by


offering market competitive compensation system. HMB has well established
and one of best compensation system in Pakistan.

BASES FOR PAY

Different companies use different bases for pay like some use senority pay
and some merit pay. HMB follows Merit pay plans that are based on
performance evaluation of employees. In addition to that, incentive plans are
also offered on the bases of behavioral encouragement plans and along with
that person focused pay is also considered. The objective of person focused
COMPENSATION
SYSTEM OF HMB
pay is to compensate employees for their knowledge, skills and competencies
require for particular job.
Merit pay plan

Merit pay plans can be defined as pay increses based on performances.HMB perfer
merit pay to motivate future performance because they give merit pay for excellent
efforts or results.
HMBs gives merit pay with addition to fixed salary to its employees .Companies
uses different performance appraisal methods like trait charactertic,behavorial ,goal
oriented etc to check performance of emlpoyees for merit pay.in same manner HMB
also do performance appraisal of its employees.At HMB behavorial system for
performance appraisal is used.Behavorial system rate employees on the extent to
which they display successful job performance behaviors.But these performance
apprisal system may vary as per postion but for majority of postion/posts HMB uses
behavorial system for performance appraisal.HMB uses number of deposit for
apprisal of employees;greater the number of deposit higher the rewards.
Sometimes,number of deposits are set to be achieved by employee and if any
employee exceed set target then he/she is rewarded more than those who have not
exceed the given target. Performance appraisal at HMB at the end of year in
December by supervisor of given postion./post.Supervisor are given performance
apprisal form and they have to fill for each employee working under
them.Performance appraisal form are given at the end of report.
Incentive Pay Plans
Incentive or variable pay is defined as compensation,other than base wages
or salaries,which fluctuates according to employees`attainment of some
standard,such as a preestablished formula,individual or group goals,or
company earnings.incentive pay are one time payment for attaining some
standards.Incentive pay plans are divided into three categories,
1. Individual incentive,
2. Group incentive,
3. Company wide incentive.
HMB also gives incentive on individual basis.and these individual incentive are
based on behavorial encouragement plans.under behavorial encouagement
plans employees recieve payment for speific behavorial accomplishments like
good attendance etc.
At HMB group incentive are also given.And these group incentives are given
on team base like if any team completes a project of HMB then all members of
groups will be given financial reward for completing project successfully.
Person-focused Pay Plans

Person focused pay plans generally reward emplyees for acquiring job related
competencies,knowledge or skills rather than for demonstrating successful job performance.
COMPENSATION
SYSTEM OF HMB
With addition to merit and incentive pay HMB also use person focused pay palns for
rewarding its employees.HMB specially use person focused pay to keep their employees up
to date with new software relating to banking sector or acquiring new knowledge/degrees like
HMB rewards employees for doning MBA/ACCA etc,HMB mainly gives person focused pay
on educational basis like doing MBA etc.
HMB uses person-focused pay because it thinks that through person-focused pay plans
everyone will start working and try to learn new skills that will help HMB to achieve its long
term goal.
COMPENSATION
SYSTEM OF HMB
DESIGNING COMPENSATION SYSTEM

There are certain aspects that must be considered while designing compensation system for
any organization. These aspects are:
Internal consistency in compensation system
Market competitiveness in compensation system
Employee contribution in pay structure

Internally consistent compensation system


Internally consistent pay system defines the relative worth of each job within a company on
the bases of which job structures are designed. It is due to internal consistency that makes
easier for the compensation manager to identify the differences in jobs in terms of
compensable factors and set the pay accordingly.
HMB consider internal consistency as a core factor before setting pay design for particular
job. The reason is to bring a balance among all jobs in terms of valuing them.

Job Description and Job Evaluation--- Tools for internal


consistency

In order to have internal consistency HMB has job descriptions that define the required skills
knowledge and abilities for particular job along with job related tasks, responsibilities and
duties.
Along with clear job descriptions HMB uses job evaluation techniques for bringing internal
consistency with in company. HMB uses both job evaluation techniques that are market based
evaluation and job content evaluation for the jobs of only top management. The reason they
do not follow the same pattern for all jobs is that after 2006-07 hierarchical structure of HMB
was changed. They have not upgraded the whole evaluation system till now due to that
hierarchical transformation and evaluation of top management jobs has become possible up to
now.
The most common compensable factors HMB consider for evaluation are skills and
knowledge of employees related to particular job.

Market Competitive Compensation System

Market competitive compensation system represents the policies of companies that can give
the company competitive advantage in the market. Such system can be designed by
conducting strategic analysis, examining the competitors pay practices with compensation
surveys or by any other method, integrating the internal structure of jobs with external market
pay rates and by determining the pay policies of the company.
HMB believes that there must be market competitive compensation system and they have
such system at work. Currently in HMB employees from same job family at same job levels
receive unequal pays. The reason is compensable factors. Employees of a particular job level
possess more skills and knowledge than other employees of same job level would definitely
be compensated accordingly and in order to have market competitiveness in system HMB do
so. HMB follows benchmark system for the sake of compensation survey. It is linked with a
company named Hewitt which provide market survey data. It also provides information of
COMPENSATION
SYSTEM OF HMB
competitors policies and practices that are helpful in comparison for further improvement as
well.

Designing Compensation Policies

HMB does not follow one size fits all policy for paying to its employees.
HMB designs compensation policies while taking into consideration of such factors like
internal consistency of pay structure, market competitive pay system, information of market
and competitors. HMB believes that by taking information of all aspects effective and fair
policies can be designed by policy makers. Along with that, HMB considers three aspects as
important, these are performance of employee, and his /her previous performance appraisal
and what pay is currently prevailing in market for specific job family. On the bases of these
factors HMB set three categories of employees named alpha, beta and gamma categories.
Employees are also divided into three categories, one with outstanding performance,
previous performance appraisal and knowledge and skill set are put into Alpha category. One
with a little below in all above criteria than employees of Alpha category is put into Beta
category and all others into Gamma categories. In this way all employees are treated and
compensated fairly in compliance with policies of company.
HMB has a little different policy making procedure for compensation bur it keeps into
consideration that its pay rates does not fall below or above of the market pay rates. It means
it follows market match policy in setting pay rates.
HMB offers commissions along with pay to those employees who are directly involved in
sales and marketing activities of company. These commission plans vary according to job
duties and responsibilities and they are paid periodically to the deserving employees.

Employee Benefits

`There are three types of employee benefits and these are:


1. Discretionary benefits
2. Employer-sponsored retirement plans and health insurance programs
3. Legally required benefits

Discretionary employee benefits are also called voluntary benefits. The goals which
employers hope to achieve when offering discretionary benefits are: protection, paid time off
and services to enhance work and life experiences. Protection program are like income
protection program, health protection program, retirement programs etc. Paid time off is
compensating employees when they are not performing their primary work duties like
holidays, vacations, sick leaves, sabbatical leaves etc. Services are like employee assistance
programs, family assistance programs, transportation services, outplacement assistance etc.

Discretionary benefits which HMB is offering to their employees are protection program and
paid time off services. In protection program they give their employees health and safety
insurance and in paid time off they offer sabbatical programs like they give them opportunity
that in evening time you can join any institute for further education. And the services which
HMB bank is offering to their employees are employee assistance and family assistance
services.
COMPENSATION
SYSTEM OF HMB
HMB bank believes that providing benefits along with pay to employees give them
motivation to work more for organization and if employees are motivated then they can
perform more work which ultimately are beneficial for whole thy organization and also
benefits make them more committed to their work because they are getting what they are
deserving.

The retirement benefits which HMB is providing to their employees are provident and
gratuity funds. Provident fund is an investment fund contributed by employers and employees
and then a lump sum is provided to each employee on the time of retirement. Gratuity fund is
part of salary that is received by an employee from his/her employer in gratitude for the
services offered by the employee in the company. HMB pays retirement benefit in the form of
lump sum payment (50% of employer contribution and 50% of employee contribution.
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SYSTEM OF HMB

CONCLUSION
The Compensation system of HMB values the performance of employees most. It has a direct
relationship with employee motivation and performance. It includes extrinsic as well intrinsic
compensation factors for employees. Extrinsic benefit plans plays an important role in
developing positive perception of an employee towards its organization and towards its work.
Instruments of intrinsic factors have a profound impact upon an employees loyalty and
commitment. In addition to that it is helpful in employee retention as well as in reducing
organizations turn over. Intrinsic factors play the role of motivators for the employees and
associate them with their job and organization. They feel important and consider their
performance as organization performance and image of organization as their own image.
COMPENSATION
SYSTEM OF HMB
) at the time of retirement. After that they dont give them any monthly payment as pension or
in the form of annuity. Up to 2005 whole the banking sector was providing pension fund but
after 2005 no any bank is providing pension fund to their employees thats why HMB is also
not providing.

HMB is providing life and health insurance coverage to its all employees even if they work
for one day and next day he is dead then he is covered under life and health insurance. If any
employee in HMB had borrowed loan I case of death of employee whole loan is covered and
also bank will give 7.5lacs to his/her family. Group insurance plan is also workable in HMB
bank. The retirement options which HMB bank give to their employees depends on market,
first they do market survey then accordingly they give to their employees.