Bank of America recently announced that it will increase its minimum hourly wage to $21 ($43,680 annually, based on a 40-hour week). This is reported to be another step toward BofA’s goal of a minimum wage of $25 per hour by 2025.
Many community banks that I have worked with have employees who are currently paid less than $20 per hour. A significant percentage of these employees typically work in the teller and customer service areas. These jobs also frequently have the highest employee turnover.
We know that employee turnover and lack of training lower the quality of service provided to bank customers.
A bank’s largest retail deposit customers are not typically the bank’s largest borrowers. Large borrowers may have an assigned loan officer who oversees both the customer’s loan and deposit relationships.
Which members of the bank’s staff normally take care of the largest deposit customers? The employees who are paid the least and work in the areas with the highest turnover. Is there something wrong with this logic?
If deposit customers receive less than acceptable customer service, the result could be the loss of the customer relationship.
Community banks are competing against many types of retail businesses, local government entities and local industries for quality entry-level and intermediate support-level employees.
It is time to rethink the administration of base compensation for these employees.
Please consider the following example.
Branch A has four employees working as tellers: one senior teller is paid $45,000 ($21.63 per hour), one trained teller is paid $40,000 ($19.23 per hour) and two teller trainees are each paid $35,000 ($16.83 per hour). Total salary expense for the four employees is $155,000 per year.
Question: How many totally productive tellers are working at Branch A? Answer: None. That’s because the senior teller and trained teller are overseeing the training and transaction processing of the two teller trainees.
Branch B has three employees working in the teller area: one senior teller paid $55,000 ($26.44 per hour) and two trained tellers, each paid $45,000 ($21.63 per hour). Total salary expense for the three employees is $145,000 per year.
Question: How many totally productive tellers are working at Branch B? Answer: Three, because there is no training of untrained employees.
At which branch, everything else being equal, do you have happier employees, a higher level of customer service, and happier deposit customers?
Clearly the answer is Branch B.
In this example, there is a savings of $10,000 per year in base compensation. There would also be a savings for the bank in employer-related payroll taxes. In addition, there would be savings in health insurance and other employee benefit expenses from not having the fourth employee.
Training is a totally unproductive task from the standpoint of customers. Customers expect to work with bank employees who are trained, accurately handle their transactions and show appreciation for them being a customer.
In many, if not most communities throughout the United States, there is a shortage of quality individuals to recruit, hire, train and retain for staff-level positions. Base compensation is frequently the key factor when an individual decides where to go to work and whether to remain with an employer.
Although higher pay cannot guarantee lower employer turnover, it is certainly a critical factor. Many banks need to reevaluate their philosophy concerning base compensation for support staff members. It is time to begin paying existing staff members a fair level of base compensation and to start paying new staff members the base compensation necessary to hire and retain quality individuals.
The benefits to the bank, employees and customers will make this the right decision for now and the future.
