Public sector banks are mulling over an additional compensation of variable pay in their salary configuration. Bankers revealed that discussion on performance-linked pay, part of overall wage negotiations have started with the unions.

The government banks are taking such a move in order to offer better compensation to their mid-level employees. This is done with the view of attracting specialists from outside as well as to hold on their talented employees. Chief from a PSU bank said, "We can hire specialists on contract, but there are a lot of issues with the compensation structure."

Currently there are seven pay-scales in public sector banks. These compensations differ from those offered to the employees of private sector banks. It is noticed that in the first two grades, there is not much difference as per the cost-to-company base but on the higher grade employees, there is a significant difference in the compensation structure of public and private sector banks.

A PSU banker said, "There are many perks that are available to our employees such as free housing often in prime locations. But all this is not factored in as there is no concept of cost-to-company. At the senior level, in certain cases the difference is as much as over 20 times, which makes it attractive for public sector executives to move out."

From the past few years, the chairmen and executive directors of PSU banks are paid incentives in reaching to the targets set at the starting of the year. These top-level employees are not included in the industry pay scales. However no such incentives are given to any other employees of the banks. So if the banks are successful in convincing the union, these performance based incentives will be offered to most employees of the banks.

In the next month, Indian Banks' Association's negotiation committee and United Forum of Bank Unions are likely to discuss on the issue. The union is demanding an over 35% hike in wages and a second pension decision is also on the outline.

Indian Banks' Association's negotiating committee is currently headed by the Chairman and Managing Director of Union Bank of India, M V Nair.

As per data collected at the end of March 2008, public sector banks had a total of 7,14,793 employees.

Besides considering a revision in their salary structure, these banks are also on a hiring spree even amid the crisis.