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Compensation Management (823)
Reviewing the organizationscurrent wage and salary
program
Introduction:-
Wages, as a means of providing income for employees and as a
cost of doing business to the employer, constitute one of the most
important subjects in the filed of personnel management. Wages
can provide a source of motivation for employees to performeffectively. The wage rate offered is one of the most important
considerations to a person who is taking a new job.
The term compensation administration, or alternatively, wage and
salary administration, has come to be accepted as the designation
for that field of endeavor concerned with the establishment and
implementation of sound policies and methods of employee
compensation. It includes such areas as job evaluation,
development and maintenance of wage structures, wage changes
and adjustments, supplementary payments, profit sharing, control
of compensation costs, and other related pay items.
Employee compensation refers to all forms of pay or rewards going
to employees and arising from their employment, and it has two
main components. There are direct financial payments in the form
of wages, salaries, incentives, commissions, and bonuses, and
there are indirect payments in the form of financial benefits like
employer-paid insurance and vacations.
In tern, there are essentially two ways to base direct financial
payments to employees: on increments of time and on
performance. Most employees are still paid based on the time they
put in on the job. For example, blue-collar workers are usually paid
hourly or daily wages; this is often called day work. Some
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employees managerial, professional, and usually secretarial and
clerical are salaried. They are compensated on the basis of a longer
period of time (like a week, month, or year), rather than hourly or
daily.
The second option is to pay for performance. Piecework is an
example: it ties compensation directly to the amount of production
(or number of pieces) the worker produces, and is popular as an
incentive pay plan. Psychologists know that people have many
needs, only some of which can be satisfied directly with money.
Other needs for achievement, affiliation, power, or self-
actualization for instance also motivate behavior but can only be
satisfied indirectly (if at all) by money. Yet even with all our more
modern motivation techniques (like job enrichment), theres no
doubt that money is still the most important motivator.
GOALS of Wage and Salary Programs
There are four principal goals that compensation programs may
seek to accomplish.
First they seek to serve a labor market function of allocating people
among firms according to the perceived attractiveness of jobs as
expressed by the rat of pay and associated pay supplements.
Second, carefully designed compensation programs enable
management to control wages and salaries and control labor costs.
A third major objective ofwage and salary programs is to keep
employees content, to minimize quitting, and to reduce employee
complaints and grievances due to inadequate or inequitable wage
rates.
A fourth and final goal of compensation is to induce and reward
better performance. In other words, pay is looked upon as a
motivator.
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Factors affecting the Wage & Salary Programs(compensation)
Union influencesPay / salary / wages rates is the major issue in collective
bargaining. However, other issues include cost of living, income
security, time of with pay and health care.
Legal AspectAll the organizations are bound to follow the Government rules and
regulations while deciding the compensation for their employees.
Also labor laws and workers Act. are considered. In addition various
organizations have their own policies for compensation.
Compensation PolicyAn employer compensation policy also influence the wages and
benefits to the employees. One consideration is that whether the
organization is leader or the follower regarding pays / salaries /
wages. Other important policies include the basis for salaries
increases, promotion and demotion, over-time pay policy and
policy regarding probationary period and leave period.
Equity and Its Impact on Pay RatesThe need for equity is crucial factor in determining the pay rates,
specially external and internal equity. In case of external equity,
pays must compare favorably with other organizations. Whereas
internal equity means that each employee should view his or her
pay as equitable given other pay rates in the organizations.
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Process of establishing pay rats while insuring
external & internal equity
Step 1: Determine the critical factors.
A survey aimed at determining prevailing wage rates. A good
salary survey provides specific wage rates for specific jobs.
Different types of salary survey including formal, informal,
commercial and Government, are conducted in this regard.
Step 2: Determine the key Jobs.
Job evaluation is aimed and determining a jobs relative worth.
Here we determine the worth of one job relative to another and
eventually results in wages or salaries hierarchy. The job is
evaluative through the content of job in relation to one another or
through the comparable factors such as skills, efforts, responsibility
and working conditions.
Step 3: Apportion current wages for key jobs.
Similar nature and status jobs are grouped in one category of pay
grade. Meaning there by these jobs are paid equal amount of
salaries / wages and other allowances and benefits.Step 4: Price each pay grade
Assignee pay rates to each of pay grades. Individual pay rates
would have to be assigned to each individual job.
Step 5: Fine-tune the pay rates
As the inflation keep on increasing there is a need to fine-tune the
pay rates i.e. adjustment according to the inflation. It is a continues
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process which takes place with the time. Normally the
organizations undertakes this process on yearly basis.
Responsibility. $2.10
Skill. $3.00
Mental Efforts. $2.70
Physical Efforts. $1.90
Working Conditions. $1.30
Total Wage $11.00
C U R R E N T I S S U E S
Comparable worth of job.
Pay secrecy.
Inflation and salary compression.
Cost of living differentials.
Legal issue.
Organizations that are serious about performance, and
which often see performance management as the core
business process for achieving their strategy, are putting
much effort into taking different views of performance from
all of the stakeholders involved to ensure success.To
support and expand further on this issue, it is necessary to
enumerate certain conditions, which must be present for rewards
to elicit desired performance:-
Important rewards can be given and tied to performance.
Information can be made public about how rewards are given.
Superiors are willing to explain and support the reward system in
discussions with their subordinates.
Rewards can vary widely, depending on the individuals current
performance.
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Compensation Management (823)
Performance can be objectively and inclusively measured.
Meaningful performance appraisal sessions can take place.
High levels of trust exist or can be developed between superiors and
subordinates.
The reward systems must be clearly communicated, well understood
by those affected and accepted as relevant.
Finally, it is emphasized that all employees should be included in the
reward opportunities.
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PRACTICAL STUDYBANK ALFALAHHistory of Bank Alfalah:
Bank Al-Falah Limited was incorporated on June 21st, 1997 as a
public limited company under the Companies Ordinance 1984.
Its banking operations commenced from November 1st, 1997. The
bank is engaged in commercial banking and related services
as defined in the Banking companies ordinance, 1962. The Bank is
currently operating through 104 branches in 36 cities, with the
registered office at B.A.Building, I.I.Chundrigar, Karachi. Since its
inception, as the new identity of H.C.E.B after the privatization in
1997, the management of the bank has implemented strategies
and policies to carve a distinct position for the bank in the market
place.Strengthened with the banking of the Abu Dhabi Group and
driven by the strategic goals set out by its board of
management, the Bank has invested in revolutionary
technology to have an extensive range of products and
services.
This facilitates our commitment to a culture of innovation and
seeks out synergies with clients and service providers to ensure
uninterrupted services to its customers. We perceive the
requirements of our customers and match them with quality
products and service solutions. During the past five years, we
have emerged as one of the foremost financial institution in the
region endeavoring to meet the needs of tomorrow today.
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Bank Al-Falah limited was incorporated on June 21, 1992 as a public
limited Companies Ordinance 1984 and commenced banking
operation from Nov 1, 1992. The bank is growing rapidly in its
equity & asset base due to strategic managerial policies and
assistance of Abu Dhabi Group.
The strength and standing of Abu Dhabi Group, principal owners of
BAL have helped Bank Al-Falah Limited launch high quality
consumer and corporate banking operation in Pakistan. Bank Al-
Falah Ltd has embarked upon a rapid expansion program to make
sure that our services reach more and more peoples. We are
headed towards an optimum sized network reaching major urban
centers in Pakistan and soon to go International.ATM machines
locations have been increased inmost of the branches but still need
to expand their network in every branch and collaboration with
other commercial banks in ATM services. It is also introducing a
new; more advanced and latest funds settlement computerized
SWIFT program in late 2002. Which is a strong point of BAL that
makes it a sophisticated and highly technological oriented bank?
Regarding the investment and deposits portfolios BAL is playing
dynamic strategies to diversity their funds in more productive
assets like; investment in T. Bills and export related concerns,
which are producing healthy profits. But all this goes to the staff ofBank Al-Falah Ltd bank that is more proficient and good risk
managers.
BAL has numerous opportunities in future to increase the volume of
business because it has options to tap the market of its own peer
units (Al-Falah Car Financing, Al-Falah Visa, & also Al-Falah Home
Finance etc) beside BAL has strong assets base, it can diversify its
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funds in more lending & investment opportunities live; Petroleum
concerns, financial derivatives business through treasury.
In nutshell, BAL has been performing very well since its birth. Allfinancial institutions of Pakistan regarding commercial banking
concerns give Bank Al-Falah Ltd as a leading bank in domestic
sector title. Through SWOT analysis we have found that BAL has
competitive edge over other peer banks and it wants to tap the
prospects of foreign banks to achieve long-term objectives of the
bank it ought to have astute, well-designed, comprehensive and
dynamic frame of undertaking which might be established after
diagnosing the conditions of country and drawbacks due to which it
lags behind.
Title of Bank Al-Falah
Logo of Bank Al-Falah
Slogan of Bank Al-Falah
Bank Alfalah Branch Network:
The Bank is fully aware that the branch network has direct
implications on the services that it provides to its customers. We
offer services through a network of177 branches and 109 state of
the art ATM machines.
Conventional Branches
Overseas Branches
ATM machines
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ORGANIZATIONAL STRUCTURE
DEPARTMENTS
Bank Alfalah Limited has the following departments:
Account Opening Department
Human Resource Department
Trade Finance
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Credits
Accounts Department
Administration / Personnel
Special Asset Management (SAM)
MIS Department
Marketing
Cash & Deposits
Foreign Currency Accounts
HUMAN RESOURCE MANAGEMENT
The policies and practices involved in carrying out the People or
Human Resource aspects of a management position, including
recruiting, screening, training, rewarding, and appraising
The concepts and techniques need to carry out the people or
personal aspects of management job are:-
Conducting job analyses (determining the nature of each
employees job)
Planning labor needs and recruiting job candidates
Selecting job candidates
Orienting and training new employees
Managing wages and salaries (compensating
employees) Providing incentives and benefits
Appraising performance
Communicating (interviewing, counseling, disciplining)
Training and developing managers
Building employee commitment
PAY PLANS & INCENTIVES AT ALFALAHPay Plans:
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Pay plans Alfalah are establish on the basis of job ratings. All jobs
are ranked from top to bottom, on the bases of compensable
factor. Employee with higher rank gets highest pay and incentives.
Total Compensation:
Example:
60% Basic Pay 15-k
30% House Rent 7.5-k10% Utilities 2.5-k
OPD 2 Gross salaries
Hospitalization Employee siblings,Parents, Wife / Spouseand childrens
Provident Fund 50% Employee, 50%Org
Gratuity If work for 10 Months
Bonuses 1.4% Of Gross salaryIncentives Only Sales department
depend upon theirperformance.
Assistant Manager Level:
25000 Car allowance + 200 Liters petrol / Month
Manager level:
Car + Blackberry
Senior Manager:
Islamabad Club Membership + BMW Car + House + Foreign Tours
Food Subsidy:
S.E, Exe, M.T so on
Rs 65
Rs 95 CompanyA.M and Above 160 RS
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Increments:
The increments are totally based on the performance of the
employees and their seniority level.
If the scale is 15000-20000 then the increment is the 20% of the
base pay, but if any employee shows the performance then this
may increase up to 35% to 50%.
Managers: Innovative ideas
Silent Warriors
Recognition of The work:
Employees who is working in Bank Alfalah for seven years or more
then seven years gets Cash Rewards, Trophy, badges and other
things.
Leave fair assistance
1 year 20 holidays 1 Gross salary
40 leaves 2LFAs
Permanent Employees:
Number of employees:
Around 1500 2000
Minimum scale starts from 15000 20000
Maximum C.E.O (Not disclosed by the organization)
Bank Alfalah focuses on providing a large number of the
compensation and benefits to its employees in a form of the
following categories:
Minimum wage:The minimum salaryfor Drivers is Rs.7000
for Tea Boys it is Rs.6500, for Administrative Staff like HR,
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Finance, Marketing, etc it is Rs.20000 and for Engineering it is
Rs.20000 to 25000.
Medical Allowance:1 gross salary per year is given to each
employee; half is given in mid of the year and remaining half will
be given at the end of the year.
Health Insurance:Like all other , Bank Alfalah also provides
health insurance policy to its employees.
Loan Insurance:At Bank Alfalah loan insurance policy is also
provided to their employees.
Transport allowance:Rs 2500 are given to female employees
only, if they travel on local transport.
House Rent:10% of the basic salary is given to each senior/
executive level employee.
Overtime:All employees are entitle for the overtime more then
130 hours per month .For overtime Bank Alfalah have specific
formula that apply on the employees gross salary, due to which
every employee have different per hour overtime rate.
EOBI:EOBI is contributed as per the standard
Children Education allowance:1 gross salary per yearProvident Fund:All permanent confirmed employees are eligible
for membership of Bank Alfalah Employee Provident Fund Scheme.
An employee contributes 8.33% of month basic salary in a year and
an equivalent amount is being contributed by the employer.
Leaves:7 Casual and 10 sick leaves are given to each employee
at all level.
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Travel Policy:Revised and categorized different levels such as
the senior level, the middle level and the junior level staff.
Meal deduction Claims: Meal books are to be maintained of
each employee who issues it, their name, employee number,
designation, signature and number of book and date at which it is
issued has to be recorded. The reason for maintaining the record is
that the company pays 60% of the expense came over the food
while 40% has to be deducted from the employees salary.
Expense Claim:The expense Claims are the expenses which an
employee make on the behalf of the company E.g. fuel used forbusiness travel, overnight stays on a business tour etc, such claim
are made while returning back to the office , after the whole
process the HR pay them back the next month along with their
salary.
Overtime Claim: If an employee has worked for more than the
regular time, they claim for the overtime amount other than their
salary which they receive the next month. Overtime claim have to
be approved through HR department.
Medical Claim:Differentmedical facilities are provided to
employees at different level of hierarchy, so if any employees
make use of this facility they can claim for the amounts to be
return next the month while submitting the hospital receipt. Their
medical clearness is done by the HR department.
Mobile deduction Claim:Such an expense claims which are
made if an employee has made long duration call for the official
purpose and they have exceeded the limit given to them then they
can make a claim by attacking a copy of mobile bill and if its valid
then HR department approved it and pay the employee their
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claimed amount along with their monthly salary of the following
month.
Dispatching of Salary Slips:Vendor prepares the salary slipand dispatch it to the HR department, further HR head office send
it to the regional HR departments their concerned employees
salary slip and they either give their employees through cash or
transfer to their accounts.
Incentive Plans:
In Bank Alfalah, incentive are provided to
Managers and Executives
Middle and Lower Level Employees
EMPLOYEE BENEFIT & SERVICES
The employee benefits & services provided by Bank Alfalah are
Health & Life Insurance
Paid Annual Vacations, Leaves, Holidays
Health Insurance Of Parents
Pension & Provident Fund
Discount On Company Products
Annual Bonuses
Educational Plans Social Events
Customized Services
Creative, Learning & Healthy Environment
Highly Qualified, Experienced & Committed Staff
Profit & Gain Sharing Plans
Financial Benefits:
The financial benefits provided by Bank Alfalah to its employeesare
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Severance Pay
Severance Pay is given according to
1. Policy2. Give Full & Final Settlement
3. Half Salary As A Complementary (Optional)
Supplemental Unemployment Benefits
Supplemental Unemployment Benefits are given
1. During Annual Routine Audits
2. Other Privileges
Insurance Benefits:
Bank Alfalah gives insurance benefits on
Workers Compensation
Complete Life Insurance
Hospitalization & Medical Insurance
Other Benefits:
Other benefits provided by Bank Alfalah to its employees are
Pregnancy Compensation
2 Bonuses For Each Employee
Faster Promotion
Introduction OfMENTORS
Bank Alfalah MOHTISIB Staff Suggestion Scheme
Family Community Concept
Salary Of Own Choice
Job Rotation Facility
Prizes & Gifts
Refreshment Packages
Short Courses & Trainings + Training Material
Traveling & Stay Allowances
Communication Benefits
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Retirement Benefits:
Bank Alfalah gives retirement benefits on the basis of
Age Pension Plans
Provident Fund Facility
Early Retirement Window
No-golden Offerings & Defined Contrib. Plan
No-social Security & Deferred Profit Sharing
Services Benefits:
Following services benefits are provide by Bank Alfalah to the
employees:
Introduction OfMENTORS (HR REPRESENTATIVE)
Counseling Services -
Financial, Career, Job-placement, Grievances
Bank Alfalah Mohtisib
Lunch & Learn Program
Employee Transportation
Educational & Training Subsidies
Flexible Benefits Programs (Few-limitations)
No-subsidized Child & Elder Care
SWOT Analysis
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SWOT analysis is a process to identify where we
are strong and where we are vulnerable, where weshould defend and where we should attack. It tells us
our strengths, our weaknesses, the opportunities which
prevail in the market and the threats which we may face
from our competitors and other from other potential
factors.
This analysis can be performed on a product, on a service, a
company or even on an individual.
SWOT Analysis of Bank Al-Falah
Here we have applied this very useful technique to identify the
strengths, weaknesses, opportunities and threats of Bank Al-Falah.
Strengths:
Strong Financial Position
As we can see in the financial statements of the bank, the financial
position of the organization is very sound and its profitability is in
increasing. The Earning per share has been increased on a rate of
about 50%, which is a very positive sign.
Highly Qualified Employees
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The bank has highly qualified and skilled workforce and it has
succeeded to attract the best banking professionals from across
the country due to its growing pace and sound reputation.
Conducive Environment
The management of the bank is very much concerned with the
development of and improvement of the working environment. The
bank has state of the art and purpose built branches where all the
modern technologies are provided to get the efficiency of the
workforce and the customer satisfaction.
Govt. Support and Encouragement
As the owners of the bank belong to UAE and the type of their
investment in Pakistan is a foreign investment, the govt. is fully
supporting the bank management due to its policy to maximize the
foreign investment in the country, to get the economic prosperity.
Fastest Growing Financial Institution
Due to its successful business policies and the strong financial
position the bank has achieved the reputation of fastest growing
financial institution in the country. It has greatly increased the
customers confidence in the bank.
Huge Expansion Plan
Due to its strong financial position the bank has undergone ahuge expansion plan to compete with the existing bank all over the
country and with the passage of time the branch network is
expanding at a very good pace.
Young and Energetic Workforce
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As the bank is a newer one in the country, the bank has an
advantage over its competitors because the majority of its
workforce is young and not very much over aged. Thus the bank is
getting maximum out put from its young and energetic workforce
by spending comparatively less on their remunerations.
Islamic Banking Division
The bank is one of the pioneers of the commercial banks who have
started the Islamic Banking along with their conventional banking.
The bank has a separate network of its Islamic Banking Divisionwhich has 16 branches across the country and this network is also
expanding at a very good pace.
WEAKNESSES:
Waiver of charges
Currently the middle management of bank Al-Falah is the big
reason for waiver of charges. Bank Al-Falah loosing a lot of its
income likes (Cheque book charge, online charges, statement
charges, and other things) because of management. This is a
weakness of bank Al-Falah.
Inexperienced workforce
As the majority of the workforce consists of young professional,
they lack in their experience. And sometimes lack of experience
becomes a hurdle while serving to the customers. It is the point
where they feel difficulty while competing the other bank, which
have a very experienced workforce.
Over work Load on Employees
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It was observed in the branch that as compared to huge business
the bank is dealing in, the no. of employees is lesser and thus there
is an increased workload on the employees. Due to this the
efficiency of the employees is reduced.
Employees are not very much Motivated
As discussed before, the workload is high and the employees,
especially the credit department, have to do late sittings to
complete their tasks. On the other hand the bank has revised its
salary increments policy to decrease the increment rate, as a resulta decreased motivation level of employees is observed.
Opportunities:
Rapidly Growing Economy
At present the Pakistans Economy is growing on a very fast pace.
The rapid growth of economy has resulted in the increase in the
growth rate of all economic sectors especially in the banking sector
which is growing at a fastest speed than ever and in future the
growth is expected to increase even a higher rate.
Increased Interest Rates
The SBP has revised the interest policy and the interest rates have
been linked with the KIBOR rates. Due to which the banks interest
rate has been substantially increased which will greatly increase
the banks profitability.
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Mega Projects Financing
As the increase in overall business activity in the country, the
investors are launching various types of Mega Projects especially inhousing and textile the bank has a great opportunity to finance
these projects at very profitable term.
Huge Demand for Consumer Financing
The increase in per capita income and overall economy has
resulted into a great demand for the consumer financing especially
for home finance and car financing and it is said that this trend will
increase more in future. The bank can earn a lot by focusing on its
consumer financing sections.
Merger with UBL
After the privatization of United Bank Limited, the management of
the BAL has purchased the majority shares of the UBL, and it is
planning to merge these two banks. As UBL is the second largest
bank in the country, this merger can make the bank the largest
bank of the country.
Growing Trend of Islamic Banking
There is a very good growth trend in the Islamic banking in the
country and in the world as well. BAL has the advantage of having
full fledged Islamic Banking network and the growth in this
particular field can be very fruitful for the bank.
Spending Practices of Mass
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As the Pakistanis are known for their extravagant practices, and to
fulfill their funds requirements they dont hesitate from getting
loans from banks. Thus there is a very good scope for the bank to
run successful business in such circumstances.
Threats:
Uncertainty of Economy
Although the economy is growing at a good pace, but there are
many factors which results in the uncertain position of theeconomy. Such as political uncertainty, WTO, increase in poverty
etc. etc. As a result there are permanent threats of future risks and
losses for the bank.
High Rate of Inflation
The inflation rate of the country has gone above the 10%. This can
result into an unfavorable situation for the bank. And especiallywhen the ownership of the bank is UAE based, the net spread forthem can substantially decrease.
Trend of Mergers
There is a trend of mergers among the banks to become prominent
in the market and to get the maximum market share. This trend
can result into the union of some leading banks which can give
tough time to the bank and it will become difficult for the bank to
compete with them.
Privatization of Banks
Due to its privatization policy, the govt. is privatizing the state
owned banks. The change in management may result in the
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increase in the efficiency and productivity of the banks. Thus it can
become a threat for the bank.
Risk of Defaults
As discussed earlier that there is a trend of launching mega
projects in the country. And every one is involved in this trend
without taking any measure for the successfulness of these
projects. This can result into the failure of this project which can
make it difficult for the banks to recover their funds from these
defaulters.
CONCLUSION
HRM managers at Bank Alfalah are performing a great job as far it
is concerned
Motivating them and looking after them. Along with the other
managers and employees
HRM managers are also doing a great job in achieving company
goals and objectives. There is a very calm and friendly atmosphere
at Bank Alfalah because of the HRM department and their policies
for keeping their employees happy, productive and efficient.
RECOMMENDATIONS
It is observed that the employees were overburdened so they
have to stay at branch till late at night. In this way their efficiency
is affected and hiring more employees can reduce their work.
The banks management should give more incentives and pay
scale of officers should be revised & improved.
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The employees should be signed jobs for specific period and than
they should shifted to other department so that they gain
knowledge of other jobs.
Bank Alfalah Limitedshould properly advertise and Communicate
to public about the services provided by it, so that more customers
will be attracted.
System and operations should be more defined and organized.
IT draw backs should be improved.
Administration drawbacks should be improved by the strict
control of general issues.
Some employees waive the bank charges (Statement charges,
cheque book charges etc) that decrease the income of the bank.
References
Bank Alfalah (www.bankalfalah.com)
Wikipedia (www.wikipedia.com)
State Bank of Pakistan (www.sbp.org.pk)
Google (www.Google.com)
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