Lenders’ higher wage bill threatens new jobs

Banks face a bigger wage bill after they agreed to a pay rise of 11 per cent for their non-management staff in what could hurt hiring as the lenders protect profits.

The increment will affect 76.6 per cent of the sector’s workers or 23,062 employees at a time when their wage bill is emerging as a threat to earnings as they reckon the reviews will increase this budget by Sh2 billion.

Clerks and supervisors

Last year, the non-management staff received a rise of nine per cent for the period between March last year and April this year.
The Kenya Bankers Association said that the rising wages could push lenders into cost-cutting and heavy automation as they move to slow down their hiring plans.

“Going forward, we are working on the finer modalities of aligning remuneration to productivity in our CBA negotiations in order to achieve a direct alignment, if not congruence, of the employer and employee goals,” said Habil Olaka, the chief executive of KBA in a recent interview.

The increments comes when the lenders have increased the number of union workers as they cut the level of managers  to trim their payrolls and reduce reporting layers for faster operations.

Central Bank of Kenya (CBK) data indicates that management staff dropped by 5.5 per cent to 7,021 in 2011 in a year that saw banks increase total staff to 30,056 compared to 28, 846 a year earlier.

The rise was driven by the number of clerks and supervisors whose count increased 18 per cent to 6, 014.

Bankers have said that they are betting on technology-based delivery channels such as ATMs, mobile, and Internet banking to slow down new hiring as this will serve more customers away from banking halls.

Agency model
The adoption of the agency banking model is also allowing banks to spread their reach without the need for additional staff or investment in building branches.

The pursuit for technology-backed banking coupled with pay increments look will push executives to freeze new employment.
The industry returned  profit of Sh63.2 billion last year from Sh57.2 billion a year earlier and its wage bill stood at Sh47 billion.