COMPENSATION SYSTEM OF

HABIB BANK LIMITED

PREPARED BY: Umair shabeer

19452
 COMPENSATION SYSTEM OF HABIB BANK LIMITED

Table of Contents
Table of Contents........................................................................................................................................2
DATA COLLECTION.......................................................................................................................................3
INTRODUCTION TO HBL...............................................................................................................................4
Company Description:.............................................................................................................................4
Brand of HBL:...........................................................................................................................................4
Vision of HBL:...........................................................................................................................................4
Mission & Mission statement of HBL:......................................................................................................4
Values of HBL:..........................................................................................................................................4
HISTORY OF THE COMPANY.........................................................................................................................5
BOARD OF DIRECTORS.................................................................................................................................6
INTRODUCTION OF HUMAN RESOURCE MANAGEMENT DEPARTMENT OF HBL.........................................7
1.SELECTING AND RECRUITING:...............................................................................................................7
2.TRAINING AND DEVELOPMENT:...........................................................................................................7
3.PERFORMANCE MANAGEMENT AND APPRAISAL:................................................................................7
4.COMPENSATION:..................................................................................................................................8
5. Employee relation:...............................................................................................................................8
COMPENSATION SYSTEM OF HABIB BANK LIMITED...................................................................................9
BASES FOR PAY........................................................................................................................................9
Merit pay plan.....................................................................................................................................9
Incentive Pay Plans..............................................................................................................................9
Person-focused Pay Plans.................................................................................................................10
DESIGNING COMPENSATION SYSTEM...................................................................................................10
Internally consistent compensation system.......................................................................................10
Job Description and Job Evaluation--- Tools for internal consistency ...............................................10
Market Competitive Compensation System ........................................................................................11
Designing Compensation Policies .........................................................................................................11
Employee Benefits .............................................................................................................................12
CONCLUSION.............................................................................................................................................13
LIMITATIONS..............................................................................................................................................14
RECOMMENDATIONS................................................................................................................................15
PERFORMANCE APPRAISAL FORM.............................................................................................................16
APPENDIX:.................................................................................................................................................18

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DATA COLLECTION
Data for this reportis collected by conducting face to face/direct interview from Shabir
Memon;Branch manager of HBL Sukkur branch and telephonic interview from Adnan
Rehman.So,we are heartily thankful to Shabir Memon and Adnan Rehman for their support to
our work.

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INTRODUCTION TO HBL
Habib Bank Limited commonly referred to as "HBL" and head-quartered in Habib Bank Plaza,
Karachi, Pakistan, is the largest bank in Pakistan. The bank has a network of 1425 branches in
Pakistan and 55 branches worldwide. It has a domestic market share of Over 40%. It continues to
dominate the commercial banking sector with a major market Share in inward foreign
remittances (55%) and loans to small industries, traders and Farmers. Overseas, it has operations
in the following countries: Afghanistan, Australia, Bahrain, Bangladesh, Belgium, Canada,
China, France, Hong Kong, Iran, Kenya, Lebanon, Maldives, Nepal, Netherlands, Nigeria,
Oman, Singapore, Sri Lanka, Turkey, UAE, UK & USA.

Company Description:
HBL is a Banking Company, which is engaged in Commercial & Retail Banking and
Related services domestically and overseas.

Brand of HBL:
HBL says “Our brand identity is the outward expression of what we stand for as an Organization.
This is summarized in our vision, mission and is supported by our values.”

Vision of HBL:
“Enabling people to advance with confidence and success”

Mission & Mission statement of HBL:

To be recognized as the leading financial institution of Pakistan and a dynamic International
bank in the emerging markets, providing our customers with a premium set of innovative
products and services, and granting superior value to our stakeholders – Shareholders, customers
and employees. “To make our customers prosper, our staff excel and create value for
shareholders”.

Values of HBL:
HBL’s values are the fundamental principles that define its culture and are brought to life in its
attitudes and behavior. It is company’s values that make its unique and unmistakable. Company
values are defined below:
· Excellence
· Integrity
· Customer focus

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· Meritocracy
· Progressiveness

HISTORY OF THE COMPANY

Mohammed Ali Jinnah, Pakistan's founding father, realized the importance of financial
intermediation while he was campaigning for the creation of a separate homeland for the
Muslims of India. He persuaded the Habib family to establish a commercial bank that could
serve the Indian Muslim community. His initiative resulted in the creation of Habib Bank in
1941, with HO in Bombay (now Mumbai), and fixed capital of 25,000 rupees. The bank played
an important role in mobilizing funds from the Muslim community to finance the All-India
Muslim League's campaign for the establishment of Pakistan. Habib Bank also played an
important role in channeling relief funds to the people hurt in the communal riots and violence
that preceded the departure of the British from India. After Pakistan was born in 1947, Habib
Bank, at the urging of Governor-General Jinnah, moved its headquarters to Karachi, Pakistan's
first capital. This gave Karachi its first commercial bank of the newly formed Islamic Republic
of Pakistan. HBL was incorporated on 25th August 1941 and operated in the private sector until
its nationalization in 1974. HBL has been approved for privatization and the privatization
commission has selected a Financial Advisor to prepare a comprehensive plan and assist in the
sale process. The government has appointed a professional management team to restructure the
bank and to recover and clean it’s doubtful and classified portfolio.

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BOARD OF DIRECTORS

• Sultan Ali Allana

Chairman

• Nauman K. Dar
President & CEO

• Moez Jamal
Director

• Sajid Zahid
Director

• Dr. Najeeb Samie

Director

• Mr. Shaffiq Dharamshi

Director

• Agha Sher Shah

Director

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INTRODUCTION OF HUMAN RESOURCE MANAGEMENT

DEPARTMENT OF HBL

HUMAN RESOURCE MANAGEMENT STRUCTURE

The HRM department plays an important role in value of any company. HBL has very
Active and one of the best HR department in Pakistan as well as worldwide. The structure is as
the President is assisted by ten Senior Executive Vice-Presidents and a staff of 29 Executive
Vice Presidents, 154 Senior Vice Presidents, 420 Vice Presidents, 831 Assistant Vice Presidents,
2350 officers Grade-I, 4108 officers Grade-II, 3364 officers Grade-III and 10658 Clerical/Non-
Clerical employees.

HR manual contains five processes

1. Selecting and Recruiting
2. Training and Development
3. Performance Appraisal
4. Compensation
5. Employee relation

1.SELECTING AND RECRUITING:

The recruitment and selection process starts with employment planning. This process of deciding
what positions the firm will have to fill, and how to fill them. Personnel or employment planning
embraces all future positions, from maintenance clerk to CEO.

2.TRAINING AND DEVELOPMENT:

Training is the process of teaching new employees the basic skills they need to perform their jobs
and development is result of that training.

3.PERFORMANCE MANAGEMENT AND APPRAISAL:

Evaluating an employee’s current and past performance relative to its performance standards is
called performance appraisal. A process that consolidates goal settings, performance appraisal,
and development into a single common system to ensure that employee’s performance is
according to company’s aims is called performance management.

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4.COMPENSATION:

Compensation refers to both intrinsic and extrinsic rewards employees recieve for performing
their jobs.Compensation is a tool used by management for a variety of purposes to further the
existence of the company. Compensation may be adjusted according the business needs, goals,
and available resources.

5. Employee relation:

Employee Relations involves the body of work concerned with maintaining employer employee
relationships that contribute to satisfactory productivity, motivation, and morale. Essentially,
Employee Relations is concerned with preventing and resolving problems involving individuals
who arise out of or affect work situations.

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COMPENSATION SYSTEM OF HABIB BANK LIMITED

HBL`s focus on attracting,developing and retaining their emlpoyees by offering market

competetive compensation system.HBL 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.
HBL 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 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.HBL perfer merit pay to
motivate future performance because they give merit pay for excellent efforts or results.
HBL`s 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 HBL also do performance appraisal of
its employees.At HBL 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
HBL uses behavorial system for performance appraisal.HBLuses 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 HBL 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.

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HBL 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 HBL group incentive are also given.And these group incentives are given on team base like if
any team completes a project of HBL 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.
With addition to merit and incentive pay HBL also use person focused pay palns for rewarding
its employees.HBL 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 HBL rewards
employees for doning MBA/ACCA etc,HBL mainly gives person focused pay on educational
basis like doing MBA etc.
HBL 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 HBL to achieve its long term goal.

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.
HBL 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 HBL 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 HBL uses job evaluation techniques for bringing internal
consistency with in company. HBL 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

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not follow the same pattern for all jobs is that after 2006-07 hierarchical structure of HBL 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 HBL 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 competitor’s 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.
HBL believes that there must be market competitive compensation system and they have such
system at work. Currently in HBL 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 HBL do so.
HBL 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
competitor’s policies and practices that are helpful in comparison for further improvement as
well.

Designing Compensation Policies

HBL does not follow “one size fits all” policy for paying to its employees.
HBL 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. HBL believes that by taking information of all aspects effective and fair policies
can be designed by policy makers. Along with that, HBL 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 HBL 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.
HBL 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.
HBL 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.

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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 HBL 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 HBL bank
is offering to their employees are employee assistance and family assistance services.

HBL 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 HBL 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. HBL pays retirement benefit in the form of lump sum payment(50%
of employer contribution and 50% of employee contribution)at the time of retirement. After that
they don’t 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 that’s why HBL is also not providing.

HBL 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 HBL 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 HBL bank.
The retirement options which HBL bank give to their employees depends on market, first they do
market survey then accordingly they give to their employees.

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CONCLUSION
The Compensation system of HBL 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 employee’s loyalty and
commitment. In addition to that it is helpful in employee retention as well as in reducing
organization’s 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.

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LIMITATIONS
1. HBL don not have pension plan policy.
2. Employee performance is the only major criterion on which employees are evaluated.
3. There is no defined policy for paying bonuses and commissions to the employees.
Commissions are only offered to those employees who are involved in sales transactions
and commissions are not fixed.
4. Employees more focus on enhancing their knowledge base rather than practicing the
current knowledge and skills properly.
5. There is no appropriate performance evaluation system set for all employees. Therefore
there lapses in performance of employees.

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RECOMMENDATIONS
1. HBL bank must offer monthly pension plan for their retired employees.
2. In HBL employees are categorized in three categories according to their performance that
is Alpha, Beta and Gamma categories. Employees in gamma category have not good
performance rating therefore they must be given special attention in terms of providing
them additional training and compensating them fairly.
3. Commission plans at HBL are provided to those employees who are involved in sales and
marketing activities of Bank products and services. Such commission plans must be
defined rather paid periodically.
4. In order to build market competitive compensation system HBL focuses more on
knowledge and skills of employees. Along with that efforts of employees and their
responsibilities must be considered as important compensable factors so that employees
not only keep themselves up to date in terms of knowledge and skills but they must
exercise them by putting their efforts for achieving targets.
5. After 2006-07 hierarchical change HBL has not developed its complete performance
evaluation system yet. HBL must develop such system as soon as possible so that
performance of employees of all levels can be evaluated and they can be compensated
accordingly.

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PERFORMANCE APPRAISAL FORM

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APPENDIX:
QUESTIONNAIRE FOR COMPENSATION REPORT OF HABIB BANK LIMITED

Q1.What are components of HR department of HBL?

Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_

Q2.Do you have a formal job evaluation plan in place?

a.Yes
b.No

Q3.Do you have written job descriptions?

a.Yes
b.No

Q4.Do you have an employee policy manual?

a.Yes
b. No

SECTION BASIS FOR PAY

Q5.Do you reward employee on senority basis?

a.Yes
b.NO

Q6. If yes then what is criteria of senority pay( years and amount of increment)?
Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
__

Q7.What type of advantages and disadvantages do senority pay systems give to your bank?
Ans:ADVANTAGES____________________________________________________________
_____________________________________________________________________________
__________________
DISADVANTAGES_____________________________________________________________
_____________________________________________________________________________
__________________

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Q8.Do you give employees merit pay/pay for their performance?

a.Yes
b.No

Q9.If yes then how do you measure employees performances for merit pay(performance
indicators)?
Ans.__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
__

Q10.Which of the following performances appraisal method do you use and for what position?

a.Trait Charicteristics
POSITION____________________________________________________________________
b.Comparison
POSITION____________________________________________________________________
c.Behavioral
POSITION____________________________________________________________________
d.Goal oriented
POSITION____________________________________________________________________
e.360 feedback
POSITION____________________________________________________________________

Q11. Which of following is source of performance appraisal in your bank?

a.Employee
b.Supervisior
c.Coworker
d.Customers

Q12.Do you reward employees for attaining a perdefined goal?

a.Yes
b.No

Q13.You give incentive on basis of ______________ performance

a.Individual
b.Group
c.Company
d.all of above

Q14.If indivdual incentive plan then which of following?

a.Management incentive pay
b.Behavorial incentive pay
c.Referral plan
d.all of above

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Q15.If group incentive pay then which of following?

a.Team base
b.Gain sharing

Q16.If company incentive pay then which of following?

a.Profit sharing
b.Employee stock option

Q17.Do you employee reward for acquiring new job related skills?
a.Yes
b.No

Q18.Which type of pay for knowladge your bank follows?

a.Stairs step
b.Skill block
c.Job point accrual method
d. Cross departmental model

Q19.What advantages and disadvantages your bank get from pay for knowladge?
Ans.ADVANTAGES____________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
__
DISADVANTAGES_____________________________________________________________
_____________________________________________________________________________
_

Q20.What is your benchmark date for conducting performance appraisals/salary reviews?

a. Anniversary
b. Fiscal year end
c. Other fixed date

SECTION:DESIGNING COMPENSATION SYSTEM

Q21.Which job evaluation technique you prefer to use?

a) Market based evaluation

b) Job content evaluation

c) Any other

Q22.What are the compensable factors that you consider while designing pay structure of any
job?

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Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_

Q23.Do you think there must be market competitive compensation system? In any case give
reason.
Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
__

Q24.Do you have market competitive compensation system?

a.Yes
b.No

Q25.From where you get information related to market and competitors compensation system?
Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
__

Q26.On what bases your compensation policies are designed?

Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_

Q27.Do you follow” one size fits all policy” for paying your employees?
a.Yes
b.No

Q28.Which policy do you follow for pay design?

a) Market lead

b) Market lag

c) Market match

Q29.Why above mentioned policy is preferred over other policies? Give reason.
Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
__

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Q30.In addition to your base pay do you give your employees any commission on sales or
services?
a.Yes
b.No

Q31.What is the appropriate amount of the annual commission you give your employees?
Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_

SECTION Discretionary benefit section

Q32.What sort of discretionary benefits your bank offers to employees?

a) Protection program like health and safety

b) Paid time off

c) services

Q33.Do you offer sabbatical leaves to your employee? If yes then is such leave paid?
a.Yes
b.No

_____________________________________________________________________________

Q34.Do you offer any employee assistance or family assistance service to employees?
a) Yes

b) No

(Do you ask for records for the sake of providing such services?)
Q.35Do your bank uses any retirement benefit formula?
a.Yes
b.No

Q36. What type of retirement plan your bank is using?

1. Defined Benefit Pension 5.401(k) Profit Sharing Plan
2. Money Purchase Pension 6. Simplified Employee Pension (SEP/IRA)
3. Target Pension 7.Other Qualified Salary Deferral Arrangements (403(b))
4. Profit Sharing Plan 8. SIMPLE Retirement Account

Q37.What is the contribution based on:

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a.Percent of base salary

b. Match, based on employee contribution
c. Discretionary contributions

Q38.What is the vesting schedule?

a.100% immediately
b. Graded vesting, 100% by 6 years
c. Graded vesting, 100% by 5 years
d. Cliff vesting, 100% by 3 years
e. Other
Q39.When do your employees become eligible for life insurance coverage?
a.Immediately
b. After one month
c. After two months
d. After three months
e. After probationary period
f. Life Insurance not offered

Q40.When do your employees become eligible for medical insurance coverage?

a. Immediately
b. After one month
c. After two months
d. After three months
e. After probationary period
f. Medical Insurance not provided

Q41.Do your bank discuss with employees about healthcare and retirement option?
a.Yes
b.No

Q42.Do your bank have any retirement policies?

a.Yes
b.No

which one___________________________________________________________________

Q43.In your opinion is it beneficial for the your bank to offer benefits along with pay to
employees? Give reason
Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
__

Q44.Do you think that provision of discretionary benefits to the employees make them more
committed to their work?
a.Yes

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b.No

Q45.What suggestions you will give for improving compensation system of your bank?
Ans:__________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
____

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