Compensation Review of Investment Corporation of Bangladesh (ICB)

Md. Golam Rabbe Habibullah Rifat

ID: 153, MBA (HRM), ID: 153, MBA

(HRM),

Department of Management, Department of Management,

University of Dhaka University of Dhaka

Abstract
Compensation is a systematic way to providing monetary value to employees in exchange for work they
performed. Compensation may achieve several purposes assisting in recruitment, job performance, and
job satisfaction. An ideal compensation management system will help you significantly boost the
performance of your employees and create a more engaged workforce that’s willing to go the extra mile
for your organization. Such a system should be well-defined and uniform and should apply to all levels of
the organization as a general system.. Plus you’ll enjoy clearer visibility into individual employee
performance when it comes time to make critical compensation planning decisions. With effective
compensation management you’ll also enjoy clearer visibility into individual employee performance when
it comes time to make critical compensation planning decisions. These performance appraisals assist in
determining compensation and benefits, but they are also instrumental in identifying ways to help
individuals improve their current positions and prepare for future opportunities. Human Resource is the
most vital resource for any organization. It is responsible for each and every decision taken, each and
every work done and each and every result. Employees should be managed properly and motivated by
providing best remuneration and compensation as per the industry standards. The lucrative compensation
will also serve the need for attracting and retaining the best employees.

KEYWORDS: Human resource, Compensation, Organization, Management, Compensation Policies

Introduction

In the era of globalization, it is too much difficult for an organization to sustain in the
competitive market competing with others. So, to compete with other organizations, an
organization needs to use its human resources in an efficient & effective way. There is no way to
sustain in the completion without the proper utilization of human resources.

Compensation Management is one of the most complex and dynamic issues in the field of
human resource management. For an organization to achieve its stated objectives, there is the
need to effectively manage the human resources aspect of the organization, taken into
cognizance one of the core aspect of resource management known as compensation
management. The ability of a manager to achieve its stated objectives to a large extent depends
on the effective implementation of compensational packages in order to motivate the
subordinates and employees within and beyond their expectation.

As it is known that ICB is a representative of Bangladesh government, it has some special

function to control the capital market. The main job of ICB is to boost the investment in our
country and to keep the capital market stable.

The compensation practice in ICB is directed by the “Govt. Pay Scale 2015.” The basic salary
and other incentives provided to the employees is almost same like other govt. organizations. In
the report I tried to find out the attitude of employees towards the compensation practices of
ICB. In this case I have found that most of the employees are happy and satisfied after govt.
declared the new pay scale.

At the last part I tried to give some suggestions from my little experience in ICB. In some cases
it is seen that the employees at lower level get less incentives that the upper level. But the
problem is the difference is larger. Govt. should take some steps to reduce the gap.

Objectives of the Study

Primary Objectives: The main aim or objective of this report is to understand properly and
gather the practical knowledge regarding the compensation management of ICB.
Secondary Objectives: To achieve the main objective this study highlights some specific
objectives that can be the following manner:
 Focusing on theoretical knowledge in the field of Human Resource Management
 Analyzing Human Resource Practices and examine the compensation management of
ICB.
 To illustrate various types of allowances and other compensation related facilities
provided by ICB.
 To know about the employee benefits plan of ICB.
 Finding out the shortcoming of compensation management procedure of ICB.

Scope

The study will focus on the compensation management of ICB; how they perform and maintain
compensation management. Also It will be discussed the current compensation practices and
policies of ICB. I am lucky that I had a great opportunity to have an in depth knowledge of
compensation management practiced by the ICB.

Limitations

Lack of Interactions: Due to Covid -19 pandemic, we had to depend on virtual platform to collect some
information. The communication gap was the main obstacle to prepare the report.

Lack of records: Insufficient books, publications, Facts, and figures narrowed the scope of
accurate analyses.
Fear of disclosure: Another limitation of this report is organization’s policy of not disclosing
some data and information for obvious reasons, which could be very much useful. As an
employee, it was not possible for us to collect all the necessary secret information. We had to
complete this report within a very short span of time that was not sufficient for investigation.
Because of the limitation of information, some assumptions were made. Our perception about
some observation may not be correct.
Methodology:

Research Design
This study makes use of survey research design that allow for the use of questionnaires to elicit data from
the respondents. According to Nworgu (1991), a design can be defined as a plan or blue print which
specifies how data relating to a given problem should be collected and analyzed. It provides the
procedural outline for the conduct of any given investigation.
3.2 Study Population/ Sample
The actual population of this study is the entire staff of ICB.

Sample Size:

The total sample size for the study is 30.

Designation No. of employees

First level Manager 10

Second level Manager 12

Others 8

Total 30

Table: 1.1 Sample size

Sources of Data
Primary and secondary sources were used. The use of questionnaire was employed to gather necessary
and relevant data from the respondents. These methods were used in order to minimize the problems
associated with data collection and to ensure that the results are visible and bias free as expected. The
questions were designed to sample the views of the respondents on the effect of compensation
management on employees’ performance.

Data Analysis and reporting:

Statistical tools and computer software like Ms Word, Ms excel, Ms Power point have been used
for analysis and reporting.

Literature framework
The word compensation has been derived from the Latin word “Compensation” which means the
reward or remuneration given in exchange for labor or service. Compensation may be financial
and non- financial.

Various scholars have defined compensation in various ways. A few are mentioned below:

According to Thomas patten jr. and colleagues,

“Compensation refers to all forms of pay or rewards going to employees arising from their
employments”

Armstrong (2005) stated that compensation management is an integral part of human resource
management approach to productivity improvement in the organisation. It deals with the design,
implementation and maintenance of compensation system that are general to the improvement of
organisational ,team and individuals performance Compensation management is concerned with
the formulation and implementation of strategies and policies that aim to compensate people
fairly, equitably and consistently in accordance with their values to the organisation, (Armstrong,
2005). Compensation management as the name suggests, implies having a compensation
structure in which the employees who perform better are paid more than the average performing
employees (Hewitt, 2009). This encourages employees to work harder in order to regain more
salaries. Armstrong and Brown (2005) postulated that compensation management is an integral
part of human resource management (HRM) approach to managing people and as such it
supports the achievement of business objective and it is strategic in the sense that it addresses
longer term issue relating to how people should be valued for what they want to achieve.
Components of Compensation:

Compensation
system

Indirect Direct
Compensation Compensation

Base Pay Merit Pay

Salary Wage

Protection Pay for Services and Incentive Deferred

Programs: Time Not perquisites: Pay: Pay:
● Medical Worked: ● ● Bonus ● Savings
Insurance ● Vacations Recreational ● plan
● Life ● Holidays Facilities Commission ● Stock
Insurance ● Sick Leave ● Car ● Piece rate purchase
● Disability ● Jury duty ● Financial ● Profit ● Annuity
income Planning sharing
● Pension ● Low cost or ● Stock
● Social free meals option
Security ● Shift
differential

Figure: Compensation system components

Organizational Overview
Investment Corporation of Bangladesh (ICB) is mainly an investment bank which mostly
deals with capital market. ICB is the national investment house which is creating demand for
securities and on the other hand to ensure the supply of securities in Bangladesh capital market.
From the establishment ICB has been taking many steps to mobilize industrialization and to
mobilize savings in the economy and to facilitate movement of savings into investments. ICB
acts as an intermediary between those who seek funds and those who are willing to lend funds.
From the inception of ICB, it has emerged as a profitable organization among public sector
entities. Every year it contributes a lot to the governments endeavor in collection of revenue and
it is one of the largest tax payers among public sector institution and therefore, an important
source of revenue for the government of Bangladesh.

The Investment Corporation of Bangladesh (ICB) was established on 1 October 1976 under “The
Investment Corporation of Bangladesh Ordinance, 1976” (No. XL of 1976). The establishment
of ICB was a major step in a series of measures undertaken by the government to accelerate the
pace of industrialization and to develop a well-organized and vibrant capital market, particularly
securities market in Bangladesh. ICB provides institutional support to meet the equity gap of the
companies. In view of the national policy of accelerating the rate of savings and investment to
foster self-reliant economy, ICB assumes an indispensable and pivotal role. Through the
enactment of the Investment Corporation of Bangladesh (Amendment) Act 2000 (No. 24 to
2000), reforms in operational strategies and business policies have been implemented by
establishing and operating subsidiary companies under ICB.
Findings & Data Analysis

Chapter Introduction
As a government agency or organization ICB follows the rules and regulation provided by
Bangladesh govt. in case of compensation management, ICB does the same thing that means it
follows the national pay scale of Bangladesh govt. Other benefits also paid as per the rules of
Bangladesh govt.

Basic Salary
Basic salary provided by ICB to its employees is followed the govt. 7 th national pay scale. In the
pay scale system, there are twenty grades. The managing directors are considered as the 1st grade.
The basic salary structure is as follows:

Table 5.1: Basic Salary by Grade (source: bdnews24.com)

So, here it is seen that the highest basic salary paid by ICB is 78,000 tk and the lowest basic pay
is 8,250 tk. Before 2015, the highest basic salary was 40,000 tk. But when the new pay scale was
declared, it has increased almost double. The senior officer which is in grade 9 is paid 22,000 tk.
But to get the above salary, an employee must have to be employed in ICB for a minimum
period. This will be more easy to understand by the following table:

Grade Pay Scale Minimum Employment

Period
1 78000 20
2 66000 17
3 56500 14
4 50000 12
5 43000 10
6 35500 05
7 29000 04
Table 5.2:
Minimum Employment period for New Pay scale

House Rent Allowance

Every employee of ICB get 50%-65% house rent allowance of their basic salary.

Basic Salary Dhaka City Corporation Other City Others

Corporation
Up to 9700 65% of Basic salary, 55% of Basic Salary, 50% of Basic Salary,
minimum 5600 tk. Minimum 5000tk. Minimum 4500 tk.
9701 to 16000 60% of Basic Salary, 50% of Basic Salary, 45% of Basic Salary ,
Minimum 6400 tk. Minimum 5400tk. minimum 5000 tk.
16001 to 35500 55% of Basic Salary, 45% of Basic Salary, 40% of Basic Salary,
Minimum 96000 tk Minimum 8000 tk Minimum 7000 tk
More than 35000 50% of Basic Salary, 40% of Basic Salary, 35% of Basic Salary,
Minimum 19500 tk Minimum 16000 tk Minimum 13000 tk
House Loan
If the employee is married and completed three years of his employment in ICB, he will get
house loan. It varies from pay scale to pay scale. But the senior officers get 95 lakhs tk for house
loan. After getting the loan, he or she will not the house rent allowance and the loan will be
adjusted with the allowance throughout his employment period in ICB.

Employees Benevolent Fund and Group Insurance

In ICB, a Government servant has to pay a certain amount of money as premium/contribution
into these two funds. Benefits in certain cases are given to an employee or his family from the
benevolent fund. Special grants are also paid to the employees from this fund e.g. for marriage of
a daughter, scholarship for study and extreme financial distress.
In case of death while in service, the family of a Government servant gets one lump sum from
the group insurance fund.

5.5. Car Loan

In ICB, the senior officers get a good amount of money as loan for buying car. The rate of
interest is very low in this case. They can take loan 30 lakhs tk for buying car. The loan will be
paid from the basic salary of the employer throughout his employment period.

The General Provident Fund

A servant after two years of service and until the attainment of 52 years of age must contribute to
the General Provident Fund (GPF). However, contribution to the GPF is optional up to two years
of service and after 52 years of age until the date of retirement.

Employees whilst in service abroad or on deputation, have to continue contributions in the same
manner as being in regular service in the parent organisation.

The relevant audit office maintains the account of each contributor separately, and the compound
rate of interest is calculated on the yearly balance of the deposit of each individual.

A refundable advance can be paid in certain installments , up to a certain limit of his deposit on
approval from the relevant authority on grounds such as house building and repair, purchase of
land, performing Hajj in the case of a Muslim employee, marriage and other religious functions.
A servant can withdraw all of his deposits in the GPF along with the interest at the time of
retiring from service or if the incumbent resigns or leaves the service on medical grounds.

. Travel Allowance
An employee gets 2tk per km. for each 100 kg goods in case of transferring from one branch to
another branch.

Festival Allowance
During every Eid Festival, Muslim employees are allowed to draw an allowance amounting to
one month’s basic salary, that is equivalent to the salary drawn in the previous month.

The members of the other religions employed in the service also receive a festival allowance
amounting to two months basic salary in one instalment during their main religious festival. A
Gazetted officer will not receive a festival allowance if he draws a recreational allowance in a
particular fiscal year.Employees on LPR are also entitled to receive this allowance, but not those
who are in full retirement.

Pohela Boisakh Allowance

Every year, the employees of ICB get a special allowance which is called Pohela Boisakh
allowance. It is amounting to one month basic salary.

Education Allowance
An employee gets 500 tk each month for each child 9(upto 2 children) from ICB.

Pension & Gratuity Rules

When an employee retires after serving for a certain period of years, he receives a monthly
emolument for his maintenance or that of his family, during the remaining period of his life. A
Government servant or his family are entitled to various types of pension depending on the
circumstances ie. Compensation Pension, Invalid Pension, Superannuation Pension, Retiring
Pension and Family Pension.

At least ten years of service is required before allowing a pension to a servant and the amount of
pension varies depending on the pensionable service length. When a pensioner is accused of
gross misconduct, the Government will have the right to withdraw his pension or keep it in
abeyance either in part or in full until the appeal, if any, by the incumbent is considered.

A Government officer has to submit his application for pension in a prescribed form to the
approving authority along with all related papers/documents as required by the rules. In the case
of non-Gazetted staff, the head of the office will examine the Service Book, and ensure that the
entire period of service is duly verified before sanctioning the pension. An amount equivalent to
one years’ basic salary is allowed to an employee, as a lump sum grant provided that one year of
earned leave is due to his credit after allowing the desired LPR.

5.12. Charge Allowance

According to this rule an employee will get a charge allowance when he is authorised in addition
to his own charge, to hold an additional charge of an office equivalent to his office or a higher
office. A person holding a lower post and transferring to a higher post on a temporary basis is on
current charge. The holding of current/additional charge is discouraged by the Government.

A person has to handover charge of the present post/office when he is authorised to take up
current charge of a higher office. The current charge of an incumbent is not a promotion/or a new
appointment as such and one cannot claim pay-scale and other privileges/benefits allowable for
being in the post but one can claim the charge allowance.

The charge allowance rules are applicable for posts in both revenue and development budgets.

5.13. Chapter Conclusion

So, here it can be easily understood that the compensation package offered by ICB is almost
same like other govt. job. As the organization is regulated by Bangladesh Bank and Finance
Ministry, it is bound to follow the rules and regulations passed from the government.
Questionnaire Analysis:

Perceptions Strongly Agree Neutral Disagree Strongly

Agree Disagree
I think that ICB provide basic salary is 40% 20% 15% 15% 10%
appropriate for me.

I think that Organization provide the bonus on 50% 25% 10% 15% 0%
time.

I am happy with the amount of bonus. 30% 20% 10% 30% 10%
The incentive system of ICB is employee 20% 20% 25% 25% 10%
oriented.
I think that company has a good compensation 35% 25% 15% 15% 10
structure.
The medical allowance is enough for me. 25% 15% 10% 20% 30%
I think that employee performance appraisal is 15% 30% 25% 20% 10%
correct.

The TA/DA offered by ICB is satisfactory. 10% 20% 25% 30% 15%
I am satisfied with my pension and retirement 20% 25% 20% 15% 20%
plan.
The working environment is employee friendly 30% 30% 10% 15% 15%
in ICB.

During preparing the paper, we found something interesting among the employees of ICB. It is already
known that as a government body, the compensation structure is fixed by the government. But they
provide something extra to their employees.

When we analyzed the answer of the questionnaire, the perception regarding their basic salary, almost all
the employees are satisfied. But the lower level employees have some objections regarding their basic
salary.

Employees opinion regarding bonus provided by ICB is interesting in this case. Almost all the employees
said that they get their bonus in time. But few have compliant regarding their bonus amount.
When we tried to know their attitude regarding incentive system, it is seen that some of them are really
don’t happy. They think that the incentive system should be healthier than they are getting from the
organization.

In case of compensation structure, most of the lower level employees are not aware of it. But the senior
officers said that they are happy with the structure.

When we asked them about their medical allowance, they responded that the allowance is not up to the
mark. The lower level employees think that the differences between them and upper level employees are
too much.

As a government organization, the performance appraisal system is too much poor. Even in many cases,
the organization does not follow any appraisal system to promote their employees. Most of the cases the
promotion is given in the base of seniority rather than performance. So the employees are not satisfied
with their performance appraisal system.

The employees are not satisfied with their TA/DA allowances. Only 30% are positive regarding the
TA/DA. Most of them said that the TA/DA allowances are not up to the mark.

But in case of retirement plan, the employees are happy. They said that the retirement plan and the
pension system is good enough. In some cases, the process is little bit lengthy. But overall they are
satisfied with it.

When we talked about their working environment, they are quiet happy with it. Most of them said that the
working environment is good. 60% respondents are satisfied and only 30% said that the working
environment is unfavorable.