Banks Use Variety Of Options To Attract Retain Employees

June 5, 2002
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GRAND RAPIDS – If necessity is the mother of invention, competition is the mother of creative compensation – at least that’s what Midwest financial institutions have discovered in their efforts to attract and retain quality employees.

According to a recent survey conducted by Crowe Chizek & Company, the nation’s eighth-largest accounting and consulting firm, banks are relying more than ever on innovative pay structures beyond the traditional paycheck to meet intense competition for employees.

Crowe Chizek’s “2000 Financial Institutions Total Compensation Survey” involved 493 Midwest banks with assets ranging from under $50 million to more than $1 billion. Participating financial institutions, primarily drawn from Michigan, Indiana, Ohio and Illinois, revealed that financial institutions are compensating employees, officers and directors with benefits such as bonuses, incentives, commissions and stock options on top of base salaries.

“In today’s economy, the intense competition among employers for quality employees and board members has forced banks and other financial institutions to come up with innovative ways to lure people,” said Hugh Reynolds, partner at Crowe Chizek.

“In many cases people aren’t satisfied with a base salary. They’re looking at the whole compensation package, which includes not just health insurance and retirement plans, but also options for additional income.”

Sweetening the pot appears to be particularly helpful in recruiting people for hard-to-fill positions in the areas of technology, mortgage banking and commercial lending. Reflecting that trend is the growing number of banks offering stock options to directors. Of the financial institutions participating in Crowe Chizek’s 1997 survey, 12 percent offered stock options to outside directors. In the 2000 survey, almost twice as many, or 21 percent of banks, offered stock options to directors.

Among other compensation practices the survey revealed were:

  • Bank presidents are receiving a greater portion of their compensation through stock options and/or bonuses rather than from annual salaries.

  • Nearly 100 percent of survey participants provided health insurance to their employees. However, the number of institutions that pay 100 percent of the premium declined by 7 percent, down to 41.1 percent in 2000.

  • The number of banks offering post-retirement medical coverage increased 5 percent since 1999, reversing a two-year trend toward eliminating the benefit.

  • The number of banks offering dental and vision coverage increased by nearly 8 percent in 2000.

  • Some 74 percent of survey participants offer some kind of pre-tax plan to employees, but only 35 percent offer a full flex plan consisting of pretax premiums and flexible spending accounts for health care and day care.

  • The average annual total compensation for outside directors in all banks is $10,208, and that amount continues to increase every year.

  • About 97 percent of banks offer life insurance as a benefit. Smaller financial institutions with assets below $50 million offer an average of $23,429, while larger institutions with assets upwards of $1 billion offer an average of $43,750.

  • Nearly 41 percent of banks still offer a defined benefit pension plan.

Information technology positions have been difficult to fill because there’s been such a demand for the different types of IT positions, said Kimberly Moch, senior human resource manager for Crowe Chizek. Community banks typically can’t pay the salaries that some of the larger manufacturers, or larger companies in general, can pay. They’re typically not using the newest, hottest software either, and that’s a big pull for IT people.

“As far as mortgage lenders, I think there are just not enough people in that particular area. There are a lot of people with degrees in finance, but people who want to sell and who do a good job at it are rare birds in any type of sales field. So talented people who can actually sell are always hard to find.”

The difficulty in filling banking positions reflects the tight labor market in general, but Moch also thinks it somewhat reflects community banks trying to go from a service to sales culture and not quite knowing what it is they’re seeking with new hires.

“When they hire people, sometimes they have the tendency to hire people like the people who are already there rather than people who can take them where they need to go,” she said.

Moch thinks demand for IT people will begin to drop this year because employers have reached a limit as to what they’re willing to pay. There’s already evidence of layoffs in some software companies.

“I think the percentages in increases in pay are going to go down. Last year they were 7 percent and the year before that they were 11 percent, so you can already see there’s a trend in that going down,” Moch observed.

Crowe Chizek’s annual compensation survey for financial institutions, which it has conducted for more than 20 years, is meant to give management and board members of financial institutions a basis for comparing their compensation and benefits practices to banks of similar size.           

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