HRM551: Compensation Management Page 1 of 13

1.0 Introduction
Employees need to be compensated for their efforts based on volume of time or volume of
production. Compensation refers to all forms of financial rewards received by employees. It arises
from their employment. It occupies an important place in the life of the employee. It is a
considerable cost to the employer. Compensation dissatisfaction can lead to absenteeism,
turnover, job dissatisfaction, low performance, strikes and grievances. Majority of labor
management disputes relate to compensation.
Compensation is a key factor in attracting and keeping the best employees and ensuring that the
organization has the competitive edge in an increasingly competitive world. The Compensation
Management component enables to differentiate between the remuneration strategies and those of
competitors while still allowing flexibility, control and cost effectiveness. It provides a toolset for
strategic remuneration planning that reflects the organization culture and pay strategies, and it
empowers line managers within a framework of flexible budget control. Compensation
Management allow to control bottom-line expenditures and offer competitive and motivating
remuneration, be it fixed pay, variable pay, stock options, merit increases, or promotion– in other
words, total compensation.
The aim of this study is to evaluate the comparative status of compensation practices of United
Commercial Bank Limited and Mutual Trust Bank Limited that can be pertinent and worthwhile.

2.0 Mutual Trust Bank Limited

2.1 Overview of Mutual Trust Bank Limited
The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a public
company limited by shares for carrying out all kinds of banking activities with Authorized Capital
of Tk. 38,000,000,000 divided into 38,000,000 ordinary shares of Tk.100 each. The Company was
also issued Certificate for Commencement of Business on the same day and was granted license
on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its
banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as
licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the
Company started its banking operation and entitled to carry out the following types of banking
business:
 All types of commercial banking activities including Money Market’s operations.
 Investment in Merchant Banking activities.
 Investment in Company activities.
 Financiers, Promoters, Capitalists etc.
Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 2 of 13

 Financial Intermediary Services.

 Any related Financial Services.
The Company (Bank) operates through its Head Office at Dhaka and 76 branches. The Company/
Bank carry out international business through a Global Network of Foreign Correspondent Banks.

Mutual Trust Bank Limited at a glance

Name of the Institution Mutual Trust Bank Limited
Date of Incorporation September 29, 1999
Commencement of operation October 24, 1999
Authorized Capital Tk. 200.00 million (initial)
Tk. 10.00 billion (as on 31 December, 2010)
Paid up Capital Tk. 100.00 million (initial)
Tk. 2120.00 million (as on 31 December, 2011)
Targeted Customers Individuals and Corporate customers
Chairman Mr. M. A. Rouf, JP
Managing Director Mr. Anis A. Khan
Web address www.mutualtrustbank.com
Registered Office MTB Centre, 26 Gulshan Avenue, Gulshan 1
Dhaka 1212, Bangladesh

2.2 Compensation Management Practices of Mutual Trust Bank Limited

To evaluate the various components of the total compensation package, the values of non-cash
perquisites and benefits have been monetized at current market rates. While computing Annual
Guaranteed Cash, items like Performance Bonus, which is variable, and Terminal Payments have
not been taken into account though these have been considered for the purpose of Annual Cost to
the Company. The compensation package has been divided into six segments:

2.2.1 Monthly Guaranteed Cash

2.2.1.1 Salary
To compare with all the local banks MTB pays relatively so high to their lower level employees.
It is done due to grab the potential employees from the market. Actually, there are few companies
in the market to pay such a high basics to their employees for which MTB is still is the first choice
of new comers. MTB has done marvelous job because now-a-days employees are more concern
of their basics in this area. MTB has successfully adapted this change. It has been seen that
Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 3 of 13

employees of MTB are highly satisfied due to the convenient salary structure as other company
in the market are not paying like this. Moreover, MTB used to review its salary once in a year.
For an instance every December, the salary of the employee review based on the performance
which is key motivating factor to perform well. Another thing that is to mention that MTB
conducts performance evaluation twice in a year according to that they are to review the salary.
The most important thing about the payment of the salary of MTB is that it clears all the salary
payments within 25th of each month which is quite absent in other companies. The employees are
paid their every month salary on their accounts, which they have to open while joining in the
company. It is good in such way that all the tax and deductable income are cut by company itself
and the employees get those amounts withdrawn the money from their account as a whole.
2.2.1.2 Medical Facilities
The medical facility provided by MTB is quite different from other banks. MTB has their own
medical team to look after their employees in case of any medical assistance. They have their
nursing home as well. Therefore employees of MTB do not have the opportunity to enjoy life
insurance which means MTB does not provides life insurance policies to the employees.
2.2.1.3 House Rent Allowance
The company also provides house rent to their permanent employees who are in the managerial
level. Each employee in the managerial level gets 55% of their basic as house rent. This
encourages the potential candidates in the market to work for MTB.
2.2.1.4 Travel Allowance
The bank also provides travel allowance to their employees. If any employee travels any place in
Bangladesh regarding company’s prospect, they will get the money or remuneration that is cost
by them but the cost that is spent is verified by the HR personnel and after that they got the
requisition of the money.

2.2.2 Annual Guaranteed Cash

2.2.2.1 Annual Increment
There is a provision of annual increment of MTB which is 10% increment based on the
performance. It works as a motivating factor for the employees to perform well. Therefore, each
employee tries their best to make it happen so that their base salary having well shaped structure.
2.2.2.2 Festival Bonus
Like the other banks, MTB provides two festival bonuses to their employee’s one is in Eidul- Fitar
another one is Eid-ul-Azha. The bonus is equivalent to the basics of the employees. Moreover,
there is another provision regarding the bonus, which is based on the performance of the employee.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 4 of 13

But it actually depends in the performance of the branch which means if a branch does well as a
whole then all the employees of that branch get bonuses of their performance.

2.2.3 Annual Variable Cash

2.2.3.1 Performance Bonus
If the bank makes profit, the employees will be entitled to 3% of pre-tax profit as performance
bonus. Fifty percent of such bonus distributed because of basic pay of an employee, and balance
fifty percent because of performance of individual employees. Performance appraisal for the
purpose made on the criterion set by the management time to time.

2.2.4 Terminal Benefits

2.2.4.1 Provident Fund & Gratuity
The employees are also entitled with provident fund in MTB. Actually 10% of the basic are
deducted from each employee for the provident fund along with this 10% another 10%
provided by the company total 20% is installed as the payment of provident fund. This fund is
given to their employees at the end of their service. If any employees leave the organization
before completing three years of employment he will get the provident fund induce from
the 10% of the basic that will calculated upon his service period which means those employees
will not be able to claim the other 10% provided by the company. In addition MTB also
provide gratuity to their which has a handsome amount apart from the basics. The
employees who complete 10 years are used to get a gratuity equivalent to the basic of 3
months.
2.2.4.2 Welfare Funds
Every year 200 taka for each employee is deducted to count in the employee welfare fund. The
money induced from the welfare fund is used for the welfare for the employees when they are in
trouble or in emergency. This money is totally distributed to the employees so that they feel safe
at their emergency period.

2.2.5 Employee Loan

Unlike other banks, MTB provides a great scheme of loans to their employees. First of all, the
permanent employees get loans from their provident fund at a cost of 10%. They can use their
money for several purposes. Secondly, from the executive level the employees are qualified
for home loans, car loans and others at a cost of 8% where it is around 15% for the customers so
it an extra benefits consumed by the employees.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 5 of 13

2.2.6 Leave
2.2.6.1 Earn Leave
The employees who complete one year of service without any unusual leave, get 30 days for earn
leave in a year. It means their paid equivalent 30 days of compensation.
2.2.6.2 Disability Leave
If any employee faces unusual accident or physical challenge, then they are provided leave granted
by the company which is called disability leave but for this leave the salary of them will not be
deduced which means these are paid leave.
2.2.6.3 Maternity Leave
The competent authority may grant maternity leave to an employee for a maximum three months
period at a time. This flexibility is provided considering the labour law made by the government.
This is also a paid leave.
2.2.6.4 Study leave
There is a fantastic opportunity for the employee of MTB. The employees who perform
extensively well and show gratitude of benefits that they can contribute for the sake of company
are entitled for recommendation to study. Generally, the employees are recommended to get 3
(three) years paid leave for their studies but all the employees do not get this advantage because
it is for those who are really high performer are to authorized to get the full payment to continue
their studies.

3.0 United Commercial Bank Limited

3.1 Overview of United Commercial Bank Limited
Being one of the first generation private sectors Bank in Bangladesh, United Commercial Bank
Limited (UCBL) started its commercial operations from mid-1983. United Commercial Bank
Limited incorporated on 26 June 1983 as a public company with limited liability under the
Companies Act 1993. The bank obtained permission to commence business with effect from 27
June 1983. Finally started banking operations on 29 June 1983 with an authorized capital of Tk.
100 million divided into 1 million ordinary shares of Tk. 100 each. UCB has since been able to
establish one of the largest networks of 168 branches among the first generation banks in the
private sector. Besides the bank currently works with 537 correspondents covering 62 important
countries in all the continents of the World which is continuously expanding to meet the growing
cross-border banking needs and expectations of the customers, enabling the Bank to maintain its
superior position in international banking.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 6 of 13

United Commercial Bank Limited at a glance

Name of the Company United Commercial Bank Ltd.

Date of Incorporation June 26, 1983
Date of Commencement of Business June 27, 1983
Authorized Capital Tk. 15,000 million
Paid up Capital Tk. 10,541.31 million
Chairman Mr. M. A. Sabur
Managing Director Mr. Muhammed Ali
Website www.ucb.com.bd
Registered Office Bulus Center, Plot - CWS- (A)-1, Road No
– 34, Gulshan avenue, Dhaka-1212.

3.2 Compensation Management Practices of United Commercial bank Limited

To evaluate the various components of the total compensation package, the values of non-cash
perquisites and benefits have been monetized at current market rates. While computing Annual
Guaranteed Cash, items like Performance Bonus, which is variable, and Terminal Payments have
not been taken into account though these have been considered for the purpose of Annual Cost to
the Company. The compensation package has been divided into seven segments:

3.2.1 Monthly Guaranteed Cash

3.2.1.1 Basic Salary
Actual average basic salary of the benchmarks has been taken. No employer agrees to provide
actual individual salary for the benchmark jobs as this is confidential between the employer and
the employee. Where one person holds a job, the individual’s actual salary has been shown. Where
2/3 benchmark jobs fall under one grade, actual average of that grade has been taken. Where actual
average has not been available, the meaningful point of the salary range, applicable to the job
grades of the benchmark has been taken.
3.2.1.2 House Rent Allowance
Specific amounts or percentage of basic salary paid in cash for each matched job has been taken.
3.2.1.3 Utilities / Maintenance
Specific amounts paid as cash allowance have been taken.
3.2.1.4 Medical Allowance
A specific amount paid in cash has been used.
3.2.1.5 Meal Allowance
Specific amounts paid in cash as allowance have been used.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 7 of 13

3.2.1.6 Travel Allowance

The bank also provides travel allowance to their employees only for the company’s prospect.

3.2.2 Annual Guaranteed Cash

3.2.2.1 Annual Bonus
This is a deferred wage not linked to profitability. Actual amount paid under this head has been
used.
3.2.2.2 Festival Bonus
Actual amount paid under this head has been used.
3.2.2.3 Leave Fare Assistance
Actual amounts paid to the employees have been taken.

3.2.3 Annual Variable Cash

3.2.3.1 Performance Bonus
Actual amounts paid have been taken. This is paid by the employers in different forms based on:
 Employee’s performance only
 Combined performance of the group, business unit and the employee
 Company performance
3.2.3.2 Profit Bonus
Actual amounts paid, based on company profitability, have been taken.
3.2.3.3 Incentive Bonus
Senior Management Committee pays an incentive bonus to all its employees. The incentive
amount is a fixed sum for each grade.

3.2.4 Terminal Benefits

3.2.4.1 Provident Fund
Actual payments made by the employers to the Fund have been used.
3.2.4.2 Gratuity
Actual amounts provided by the employers in the Books of Accounts have been used.
3.2.4.3 Pension Fund
Actual payments made by the employers to the Fund have been used.

3.2.5 Monthly Cost of Benefits

3.2.5.1 Company Leased Accommodation
Actual cost has been taken.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 8 of 13

3.2.5.2 Household Effects (Depreciation)

This reflects the cost of depreciation because of hard and soft furnishing and electrical appliances
provided by the comparators.
3.2.5.3 Utilities / Maintenance
Costs under this head have been taken at actual.
3.2.5.4 Telephone
Actual cost has been taken.
3.2.5.5 Company Car (Depreciation)
Where company cars are provided for both functional and personal purposes, the figures
mentioned represent the cost of depreciation.
3.2.5.6 Running and Maintenance Cost
Actual amounts spent for fuel and car maintenance have been used.
3.2.5.7 Driver’s Wages
Where drivers are Company employees, their actual cost has been taken. Where Private Driver’s
wages are paid for, actual amounts paid to the employees have been taken.
3.2.5.8 Registration / Insurance / Tax
Costs of registration, insurance, tax, etc. have been taken, at actual.
3.2.5.9 Entertainment Allowance
Specific costs reimbursed have been utilized.
3.2.5.10 Canteen Subsidy
Specific costs because of company provided subsidized meals have been taken.
3.2.5.11 Club Membership
The actual amounts paid for by the employers have been utilized.
3.2.5.12 Group Life Insurance
Actual premium paid by the employers has been used.
3.2.5.13 Medical Expense
The average cost to the employer because of medical reimbursement has been used, at actual.
3.2.5.14 Hospitalization Scheme
Premium paid by the comparators under the Hospitalization Insurance Policies has been taken at
actual.

3.2.6 Loan Scheme

All employees are eligible to any purpose loan provided they have served the organization for 2
years.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
 HRM551: Compensation Management Page 9 of 13

3.2.7 Leave Entitlements

3.2.7.1 Casual Leave
Entitlement to casual leave for the Executive at Head-Office and Branch Site, it is 15 days based
on each calendar year. The employee is entitled to exercise Casual Leave from the next day of
joining; though the Casual Leave is pro-rated for the balance period of the year counting from the
joining date. Casual Leave can be taken with Weekends, Public Holidays, Earned Leaves, etc. but
be limited to only 3 days.
3.2.7.2 Sick Leave
Entitlement to Sick Leave for the Executives at Head-Office and Branch Site it is 15 days on the
basis of each calendar year. The employee is eligible to exercise the Sick Leave benefit from the
date of his/her joining. The above entitlements represent the maximum number of days Sick Leave
that an employee can avail in a year. If an employee is sick on Weekend or on a Public Holiday,
that day will not be counted as a sick day and the number of Sick Leave taken out of his/her
allocated days will be excluding those days.
3.2.7.3 Earned Leave
Entitlement to Earned Leave for the Executives at Head-Office and Branch Site is 15 days on the
basis of each completed year of service. The entitlement to Earned Leave is exclusive of
Weekends and Public Holidays i.e., Weekends and Public Holidays falling during the annual leave
taken will be considered additional to the entitlement. However, Earned Leave is counted from
the date of joining but it cannot be taken until the employee passes the probationary period
receiving confirmation.
3.2.7.4 Maternity Leave
The period of Maternity Leave shall be 84 actual days of absence which shall include the Public
Holidays and Weekends (non-working days) and including the day of delivery.
3.2.7.5 Study Leave
Study leave is normally granted if the course of study which the employee intends to pursue is
likely to benefit the Bank’s operations.
3.2.7.6 Hajj Leave
Special leave may be granted to the Permanent or Contract employees with or without pay and
allowances at the sole discretion of the management.
3.2.7.7 Special Leave
Extraordinary leave may be decided to the enduring or Contract employees with or without pay
and allowances at the sole discretion of the management. Application for special leave should be
forwarded to HR/Personnel department, through the relevant departmental head, along with

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
HRM551: Compensation Management Page 10 of 13

appropriate reasons and recommendations for necessary action. Some examples of such leave
request may be for marriage, death in the family, etc.
3.2.7.8 Leave Encashment
Executives before leaving the Bank due to resignation, retirement or termination are allowed to
cash the Earned and Compensatory Leave due to them up to a maximum of 30 days, while for
workers it is 20 days plus the prorated entitlement for the current year. The amount paid on
encashment includes only the employee' s last drawn basic salary for the period. Allowances
are not included in this amount.

4.0 Comparison of compensation practices between Mutual Trust Bank

Limited and United Commercial Bank Limited
Subject Mutual Trust Bank Limited United Commercial Bank Limited
Compensation MTBL does not provide any kind UCBL provides compensation
Benefit of compensation benefit for 60 ages benefit to all ages employees.
above employees.
Provident Fund Employee contribution, equal to Employee contribution, equal to
10% of the basic salary, is deducted 10% of the basic salary, is deducted
each month through the payroll. each month through the payroll. The
The Bank contributes an equal Company's contributions are
amount. If any employees leave the accredited to the individual
organization before completion 3 employee's account.
years of employment, he will get
only the 10% which is deducted
from the basic salary.
Gratuity The employees who complete 10 The employees who complete 12
years are used to get a gratuity years are used to get a gratuity
equivalent to the basic of 3 equivalent to the basic of 6 months.
months.
Annual There is a provision of annual There is a provision of annual
Increment increment of MTBL which is 10% increment of UCBL which is 11.5%
increment based on the increment based on the performance.
performance.
Life Insurance MTBL does not provide life UCBL provides life insurance
Policy insurance to their employees. facilities to their employees.
Bonuses 215 days + 100% of the Bonus 200 days + 100% of the Bonus
112 days + 50% of the Bonus 90 days + 50% of the Bonus

Performance If the bank makes profit, the If the bank makes profit, the
Bonus employees will be entitled to 3% of employees will be entitled to 5% -
pre-tax profit as performance 8% of pre-tax profit as performance
bonus. bonus. It is based on the decision of
Board of Directors.
Festival Bonus MTBL provides two festival UCBL provides three festival
bonuses to their employees. bonuses to their employees.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
HRM551: Compensation Management Page 11 of 13

Meal Facilities Nil Meals are provided at a subsidized

rate.
Accommodation MTBL provides expenses for the The Bank on the basis of
Facilities accommodation to their permanent requirements and availability
employees who are in the provides accommodation to UCBL’s
managerial level getting 55% of Top Executives at their own
their basic salary. established facilities in Dhaka city.
Outside the Dhaka city, the Bank
provides expenses for the
accommodation.
Medical MTB has their own medical team to The bank will compensate the cost of
Benefits look after their employees in case authorized medical treatments in
of any medical assistance. Bangladesh including
hospitalization, surgical and
childbirth subject to the conditions
mentioned here. The Bank reserves
the right to approve the Medical
Practitioner consulted.
Transportation If any employee travels any place Board of directors are entitled to 24
Facilities in Bangladesh regarding company’s hours company paid transportation.
prospect, they will get the money The company also pays for the fuel
for the actual cost that is verified by at cost, Driver’s salary, and for all
HR personnel. necessary maintenance/repair and
administrative cost of the vehicle.
Employee Loan The permanent employees get loans All employees are eligible to any
from their provident fund at a cost purpose loan provided they have
of 10% for several purposes. From served the organization for 2 years.
the executive level the
employees are qualified for home
loans, car loans and others at a cost
of 8% where it is around 15% for
the customers.
Leave
Entitlements:
Casual Leave 10 15
(with full
wages)
Sick Leave (on 10 15
½ average
wages)
Earned Leave 30 15
(one year of
service without
any unusual
leave)

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
HRM551: Compensation Management Page 12 of 13

5.0 Conclusion
This assignment has been focused on the compensation practices of two private banks of
Bangladesh. There are some components that are taken into consideration during pay in our
country, but it varies significantly among banks regarding pay. We have tried to focus on the pay
differences, possible reasons of using different pay components used by the both bank in our
country. Finally, we came up with difference of compensation practices between MTB and UCBL,
which they used for their bank so that they can perform better.

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.
HRM551: Compensation Management Page 13 of 13

References

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ed.).New Delhi: Prentice - Hall of India.
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compensation-management-understand-43430.
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4. Dessler, G. (2012). Human Resource Management (13th ed.). Pearson.
5. Guirgis, H. E. (2007, February 8). Doc Slide. Retrieved August 15, 2015, from Doc Slide
Website: http://docslide.us/business/compensation-and-benefit-chapter-1.html
6. www.ucb.com.bd
7. www.mutualtrustbank.com

Comparison of Compensation Practices: A study based on Mutual Trust Bank Limited and
United Commercial Bank Limited.