Nov 2014 Financial News

IDT says NCB can afford 16 per cent salary increase

Nov 10, 2014

THE Industrial Disputes Tribunal (IDT) has awarded a pay increase to employees of the National Commercial Bank (NCB) of 16 per cent, compounded over the two-year period, October 1, 2012 to September 30, 2014.

The award is for an eight percent increase, effective October 1, 2012, and a further eight percent increase effective October 1, 2013, which means that the benefits, which also include a number of allowances, will have to be paid retroactively.

The workers were seeking a nine percent increase each of the two years, while the bank had offered five per cent and four per cent, respectively.

The IDT panel, which made the award after hearing from representatives of both the NCB and the NCB Staff Association (NCBSA), said it made the award on the basis that the bank has the ability to pay the increases as it is enjoying increased profits and all key performance indicators are pointing in the right direction.

The tribunal's award brought to an end nearly two years of wage negotiations, which began in December, 2012 and included a brief work stoppage on May 27, 2013, which ended after an urgent intervention by the Ministry of Labour and Social Security. However, the ministry was unable to conclude the negotiations, and it was referred to the IDT.

The panel looked closely at the issue of the bank's ability to pay, based on the case made by the NCBSA that NCB had the ability to pay the nine per cent increase, as it would not impair its profitability.

The NCBSA also submitted that while the financial sector was impacted by the global financial crisis, the impact was minimal, as concluded by a "stress test" undertaken by the International Monetary Fund (IMF), the Bank of Jamaica (BOJ) and the Ministry of Finance and Planning.

The NCBSA said that, in addition, the Jamaica Debt Exchange (JDX) had no significant impact on the bank's profitability as a financial sector stability fund, provided by the international lending institutions, was not utilised by local banks as there was no need for them to draw down on the fund.

The NCBSA insisted that private sector wage increases should be driven by ability to pay, as a wage freeze in that sector could have a negative impact on the economy.

"The argument that a nine per cent salary increase could have a negative impact on the bank, as it would be a "large increase" is flawed, as that would translate into an increase below the rate of inflation, and an increase below the rate of inflation could not be considered excessive," the association argued.

The staff association also noted that, according to the BOJ Prudential Indicators of Commercial Banks 2013, in terms of "profitability, liquidity, asset quality and capital adequacy", the banking sector is "extremely strong and resilient".

However, NCB claimed that the NCBSA's claims were "unreasonable", and not in accordance with increases given within the financial sector, and that the bank was not in a position to pay those increases, which it saw as "contrary to the national interest".

The bank said that its offer of five per cent in year one, and four per cent in year two of a new contract, was made against the background of a deteriorating environment, with net profit down, ratios trending in the wrong direction, capital adequacy falling and cost to income ratios increasing.

The bank also said that the NCBSA's claim that it had the ability to pay was made without any concern about actually confirming that it had the ability to pay, and that it failed to seriously consider the effect of the increase on customers and shareholders.

The NCB also insisted that both the JDX and the National Debt Exchange (NDX), as well as the public debt exchange, have had significant impact on its profitability. It said that evidence of this was that between 2011 and 2013 its share price declined on the Jamaica Stock Exchange and there was a decline in net profit of 14.9 per cent n 2013 and a decrease in earnings per stock unit, as well as an increase in cost to income ratio from 47 per cent to 56 percent.

However, the IDT sided with the NCBSA, stating that "the evidence in this matter points to an institution which is enjoying increased profits and, more importantly, all the key performance indicators are pointing in the right direction".

The IDT panel was chaired by Norman Wright, and also included Rion Hall and Trevor McNish. The NCB was represented by attorneys-at-law Walter Scott and Anna Gracie, and the NCBSA by Danny Roberts, industrial relations consultant, and Paul Stewart, its chairman.

 

Source:
BY BALFORD HENRY Senior staff reporter balfordh@jamaicaobserver.com
Jamaica Observer
Monday November 10, 2014    

http://www.jamaicaobserver.com/business/IDT-says-NCB-can-afford-16-per-cent-salary-increase-_17912078