North South University

Compensation Practices in IDLC Finance Limited,

Bangladesh

Submitted by: Submitted to:

Md. Mohtasim Neaz Dr. Md. Shariful Alam Khandakar
ID 201 6639 660 Department of Business & Economics
Course: BUS 601 North South University
Sec: 04

Date of Submission: January 10, 2022.

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 Table of Contents

Company Overview…………………………………………………………………page 03

Department of Human Resource…………………………………………………...page 04

HR and compensation committee………………………………………………….page 05

Compensation Structure……………………………………………………………page 06

Recommendation……………………………………………………………………page 18

Reference…………………………………………………………………………….page 19

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 Company overview
IDLC Finance Limited is a Bangladeshi company, and IDLC stands for ‘Industrial Development
Leasing Company’. It is a Non-Banking Financial Institution, and the head office of IDLC is
situated in Dhaka, Bangladesh. IDLC finance limited is the biggest multi-item and multi-portion
Non-Banking Financial Institution, also it is listed as one of the 20 biggest promoted organizations
in Bangladesh. As one of the loftiest budgetary brands in its industry, IDLC holds a separated and
strong get a handle on in Corporate, SME, Retail and Capital Showcase parts. The organization
has 33 a long time of legacy in serving the commerce. IDLC has been getting dependably AAA
long pull FICO certification from The Rising Credit Rating Constrained (ECRL) from 2012, for
the outstanding contribution of checked on financials.
International Finance Corporation (IFC) of the World Bank established IDLC in 1985. With the
collaboration of IFC and German Investment and Development Company, Kookmin Bank a
Korean Development Financing Corporation, The City Bank Bangladesh Limited, Sadharan Bima
Corporation of Bangladesh and Aga Khan Fund for Economic Development, IDLC had started its
journey. The company was the first and only leasing company then, and after that Bangladesh
Bank provided IDLC the license as a financial institution under the Act 1993. The company had
started its journey with only five staff members, but within these 33 years, it has turned into the
largest financial institution in Bangladesh. Currently, 1400 people are working as employees for
this company and maintaining 45,000 clients.

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 Department of Human Resources [HRD]

HR of IDLC has a belief that the human resources consist of not only the employees but also the
health and wellbeing, innovation, experience, motivation, expertise of employees are included. So,
the responsibilities of IDLC HR are as follows:

1. Employee Well-being
2. Talent & Career Development.
3. Working Environment
4. Rewards and Compensation

The responses of HR to these aspects are:

 They concentrate in guiding the right talent for the right role for team building.
 IDLC is offering an ideal environment to its employees to practice a good culture.
 Training sessions are provided on a regular basis to the employees for development.
 Career development programs are arranged to increase employee engagement.
 For remuneration offer, deserving employees are selected to encourage employees and
ensure sustainability.

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 HR and Compensation Committee

To maintain ethical HR practices with running the organizational functions smoothly, IDLC has
HR and compensation committee. The motives of this committee includes the guidance for the
management in executing corporate governance with oversight responsibilities that is related to
establish a proper people management and compensation practice. The committee has 9 members,
the head of the committee is the CEO and MD of the IDLC. The model of HR and Compensation
Committee is given below:

Arif Khan, CFA, FCMA; CEO & Managing Director

H. M. Ziaul Hoque Khan, FCA, Deputy Managing

Director

M. Jamal Uddin, Deputy Managing Director

Mir Tariquzzaman, Chief Technology Officer (CTO)

Asif Saad Bin Shams, Head of Credit and Collection

Ahmed Rashid, Head of SME Division

Syed Javed Noor, Head of Consumer Division

Mesbah Uddin Ahmed, Head of Corporate Division

Akhteruddin Mahmood, Group Head of Human

Resources

IDLC HR & Compensation Committee

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Human Resource Management (HRM) is undoubtedly one of the most influential departments for
a successful organization. Managers of HRM run the system, maintain every employees profile,
develop and operating the system. For essential changing in an organization, HRM works for the
transformation to determine the final outcome. The required processes are done manually or
automatically. In short, it is crucial to have proper management and good practices in the HRM
department. In the modern era, the structure and development of an organization depends on
Human Resource Management. HRM department manages the resources of the organization with
taking care of some important areas -

a) Organizational Development

b) Compensation System for the employees

c) Relationship between employees and employers

d) Recruitment and selection

e) Setting up the organizational Culture

f) Arranging training and development sessions

Compensation Structure

Strategic Compensation: Compensation management is an important component of Human

Resource Management. Compensation Management of an organization includes the salary,
bonuses and monetary benefits & non-monetary benefits such as recognition, motivation, personal
growth etc. The compensation strategy differs organization to organization, and the approaches &
philosophies of the managers are also different. To manage human resources successfully and
efficiently, most managers use compensation and benefits as a primary strategic tool
Moreover, by a good Strategic Compensation is an organization attracts most talented
employees, and also helps the organization to increase the sustainability. The talented employees
put their best to achieve organizational goal when satisfied with the compensation system.
Currently, business environment demands innovative ideas and people work under immense

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pressure, but rejects inexperienced people. For this reason, the turnover rate increases. Standard
strategic compensation and reward system helps to retain the best performing employees, and their
talents and potentialities are improved, and thus the profit increases.

Strategic Compensation Approach

Extrinsic compensation: Extrinsic compensation is a monetary value that is given to the

employees as a price of their efforts for the job including some non-monetary rewards. Under
extrinsic compensation, all the tangible and visible recompense are found like salary,
remuneration, bonus, incentive, allowances etc. The non-monetary compensations are protection
programs like benefits (Medical insurance), services (Day care assistance) etc. Different parts of
the extrinsic compensation are discussed below.

Salary structure: The most common way to give recompense to an employee is the salary
structure. Organizations decide on the payment of one employee on the basis of salary. The actual
salary varies from organization to organization. The most common bases for salary structure is as
follows:

1. The Length of Time

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2. Exempt and Non-exempt

3. Job Family

4. Geography

5. Grade or Rank

IDLC has got several pay structures. Most of the companies use some common salary bases for
different divisions.

Graded Structure: Under graded structure employees receive salary, bonuses and other benefits
in accordance with the rank in the organization. Employees have also structured the Annual
Performance Bonus (APB) according to the grade and position. IDLC HR follows a policy of
different salary structure for different rank. Different pay grades of IDLC will be discussed in the
next section.

Job Family Structure: The job family structure confirms that the division was built on skill,
competencies and activities. Every job family has a different salary structure. For example, the
sales team has a different salary structure than the finance team.

Pay Grades: Through pay grades, benefits of the employee are decided. Pay grades helps to
prepare a structure for compensation by deciding the payment obtainable in the employment
procedure. There are 16 grades in IDLC Finance Limited, and a particular pay grade of IDLC
includes minimum or a small number of positions.

Job Evaluation: An organization has to conduct job evaluation program before deciding the pay
grades. Job evaluation has purposes; the main purpose is to conduct a comparison between jobs in
order to set up pay grades to determine a rational salary structure.

IDLC human resource department has done the job evaluation before determining these 16 pay
grades. Recently, HRM department has purchased a software for job evaluation named

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International Position Evaluation through (IPE). This device allows rapid, consistent
measurement of positions’ worth and value to job families along with reliability.

1 • Chief Executive Officer and Managing Director

2 • Deputy Managing Director

3 • General Manager

4 • Deputy General Manager

5 • Assistant General Manager

6 • Senior Manager

7 • Manager

8 • Assistant Manager

9 • Management Trainee

10 • Senior Executive Officer

11 • Executive Officer

12 • Probationary Officer

13 • Senior Officer

14 • Officer
• Assistant Officer
• Support Officer (Front Desk)
• Junior Officer
15 • Senior Trainee Officer
• Trainee Oficer
• Assistant Trainee Officer

16 • Support Staff

Pay Grades of IDLCFL

Pay Ranges

The midpoint or reference point is the going rate for the job in the market.

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HR department has specified these midpoints first, after finding the minimum and the maximum
values. The midpoint or reference point is regerred as Market Compa. Market Compa ratio was
specified through a market survey. To find out the market average pay for each position in a pay
grade, this survey was conducted. IDLC has set the midpoint of their pay scale higher than market
Compa.

Pay Range
P 100
(P 70 to P 130)

Pay Grades

Pay Range of IDLC

According to the policy of IDLC, the salary band of each position is P 70 (70%) to P 130 (130%)
of P100 or market Compa, where P 70 is the minimum and P 130 is the maximum point. So, this
is how the pay range of each position is set in IDLC.

Pay System

Pay system is a method of determining the basis an employee paid for a position. The bases of pay
system are; an employee’s experience, job tenure, knowledge and skills necessary to do a job. An
organized pay system helps to prepare a fair and consistent method for setting up a pay rate. The
ways of pay systems are-

 Longevity Pay
 Seniority Pay
 Merit Pay.

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Merit Pay

Previously, IDLC followed a Seniority Pay systems, but now the practice of Merit Pay is done.
Through Performance appraisal merit pay system is set, and IDLC’s performance appraisal system
is briefly discussed below.

The performance appraisal the rating is analyzed while of Salary Increment is done. If any
employee gets 1A in the performance appraisal, then that employee receives 10% salary increment.
A Special Increment is arranged by the managing Directors for employees because of any specific
task, and for extraordinary performance. Poor rating in the performance can lose the increment.
Individual performance appraisal and the Annual Performance Bonus are related.

Salary Increment

IDLC performs a market survey to understand the market condition every year before reviewing
the salary once. The salary increment proposal is presented to the Board of Directors to take the
final decision. Every employee gets the increment in their account on every July 1 after the
approval. Managing Director has the authority to adjust the increment any time for Special reason
and extra ordinary performer.

Bonus

Bonus is the financial compensation that is received by the employees above and beyond the
normal payment expectations. Bonus is given as extra payment for performance, and for special
reason with salary. IDLC gives bonus to the employees to motivate them, to increase sustainability,
to show gratitude, to follow organizational and the government rules. Two types of bonuses are
given here.

a) Performance Bonus: The additional amount that employees receive for good performance or
for any special task is called the performance bonus. The amount is usually added with the salary
after any special task or project is completed. On 31St December of every year, IDLC provides

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performance bonus to its employees. The bonus amount depends on the total profit of the year,
and the Broad of Directors decides it.

X= Basic Salary/Standard.

3A 2A 1A 3X 7X 10X

3B 2B 1B 2X 5X 7X

3C 2C 1C - 2X 3X

Performance Bonus (right) for each Performance Rating (left)

b) Festival bonus: In Eid-ul-Fitr and Eid-ul-Azha, the permanent employees of all religions of
IDLC receive festival bonus equivalent to basic pay of one month. Also, on aforementioned
occasions, employees receive 50% of monthly consolidated pay for festival bonus under HR
Contract.

Incentive Pay

There are three types of incentive pay-

 Individual Incentives
 Group Incentives
 Company-wide Incentives

DLC offers incentive pay framework as it were in their sales divisions. Firstly, they provide a
target to employees and by fulfilling the target, they get the incentive pay. By each point of the
target, the incentive pay installment gets higher. When an employee meets the target, he/she
receives promotion too. The HR group will deliver the representative the disbursement sum of
amount for each point. If an employee can meet the disbursement, the HR group gives him higher
incentive amount than the past one.

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Terminal Benefits

IDLC promises these benefits at time of recruitment. These benefits are different in other
companies. These benefits may vary according to IDLC policies. IDLC mostly use-

 Provident fund
 Leave Encashment
 Gratuity
 Assistance in finding a new job
 Extended health insurance coverage and.

Gratuity: The permanent employees receive gratuity while retiring, but the employees have to
complete five years with IDLC. On the basis of the last basic salary, and the length of the service,
the gratuity is paid. IDLC HR follows the scale showing below.

Years of Service Gratuity Payment

5 years or above, up to 10 years 1 month basic

10 years and above, up to 15 years 1.5 times basic

15 years or above 1 times of basic

Gratuity Payment Scale

Provident Fund: The employee provident fund is governed according to the “IDLC Employee
Provident Fund Rules”. Employees of IDLC contribute 10% of their salary to the provident fund
in every month.

Encashment Facilities of Annual Leave: Employees receive an extra amount in exchange of the
leaves. Employees can encash the amount anytime. At the time of the separation, IDLC provides
60 days of annual leave encashment on the basis of employee’s last basic salary.

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Fringe Benefits

For employee satisfaction, fringe benefits amount is provided by IDLC including health insurance,
accommodation benefits, transportation service, lunch and snacks etc. IDLC offers fringe benefits
as described below:

Leave benefits

1. Annual leave- After one-year completion, an employee gets annual leave of 25 working days.
This leave is credited into that employee’s leave account.

2. Casual Leave- An employee has casual leaves of maximum 5 working days in a year, but not
more than 3 consecutive days at a time. Employees apply for this leave on IDLC Asset
Management Limited. After that, approvals from the supervisor and the line manager are needed
for the leave. Employees can directly contact with HR department if they face issues while
applying for leaves online.

3. Prolonged sick leave- Prolonged sick leaves can be availed as follows in a calendar year-

 First 30 days with full pay

 Next 30 days with half basic pay
 Above 60 days and up to 180 days without basic pay.
4. Maternity leave- A female employee can take maternity leave during the pre-maternal, and
post-maternal period up to 6 months.

5. Paternity leave- An employee can have maximum 5 days of paternity leave up to his second
child.

6. Study leave- IDLC gives employees paid study leaves if that particular study is required. The
extra training or study is not sponsored usually from IDLC. The employee can have study leave
without payment with the decision of managing directors.

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Allowances and other Privileges

1. Overtime allowance- Overtime allowance is for; Support Officer, Junior Officer, Office
Assistants, Assistant Officer, and Drivers. The overtime payment is double of the basic salary, and
employees get paid for overtime work.

2. House rent allowance- IDLC does not have accommodation facilities, but Employees get home
rent allowance according to designation and location.

3. Furniture and household equipment allowance- Employees receive furniture and household
equipment allowances from the grade of senior manager and higher. Senior Managers receive
45,000 Taka as an allowance to purchase furniture.

4. Utilities- Employees receive monthly allowance for utilities in accordance to designation.

5. Medical allowance and benefits- Some of the hospitals and diagnostic centers have an
agreement with IDLC to give their employees discounts on treatments and customized health
packages. From United Hospital Limited the employees of IDLC receive 20% discount in all type
of test.

6. Hospitalization scheme- Under the hospitalization scheme, IDLC pays all the expenses if any
permanent employees get hospitalized, and require major treatment.

7. Conveyance- Though IDLC does not offer any transportation facilities on the daily basis, but
employees can use the office car just for the day for office purpose.

8. Transport allowance- A monthly transportation allowance is given to managers and above

employees according to the designation. Managers receive BDT 22,000 per month as an allowance
for transportation.

9. Domestic travel allowance- Expenses related to any office tour or the travel for office purpose
is paid by IDLC. Employees also receive allowance per day for long period of traveling.

10. Foreign travel allowance- The expenses including the visa fee, hotel expenses, air fare will
be paid by IDLC while employees travel outside of Bangladesh. Employees receive a daily
allowance, too. Senior Managers are provided $122 as daily allowance.

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11. Outstation allowance- When IDLC send employees in an unknown place outside Dhaka or
their hometowns for the job, then employees can have this monthly allowance. BDT 5000 taka per
month as outstation allowance is given to the assistance officers.

12. Leave fare assistance- Leave fare assistance is provided to every permanent employee, and
the amount is 2 times of basic for the Office Assistants, Junior Officers, Drivers, and 3 times of
basic for other employees.

13. Welfare fund- Employees are granted specific amount from the IDLC Employees’ Welfare
Fund for the following circumstances-

 Outstanding performance of an employee or his/her family members

 Marriage ceremony of the employee (Support Staff) or his/her dependents
 Serious sickness of the employee or his/her family members
 Educational expenses of the employee’s (Support Staff) spouse/daughter/son.

14. Group life insurance- Only the permanent employees get this insurance scheme. In the time
of employment, if any employee expires in ILDC, then the nominee of that employee receives up
to 4,00,000 (Senior Manager) from insurance scheme.

15. Educational aid- An employee can apply for educational support for MBA or other
professional degree from a list of universities after 5years of continuous service. However, the
education support amount has to be the amount mentioned in the IDLC HR Manual about this
scheme.

16. Communication scheme- A separate SIM card from IDLC for all the permanent employees
is given along with the sales team communicate with the clients for office purpose.

17. Cell phone scheme- Employees from Management Trainee (MTO) to higher position can have
an amount to purchase an updated mobile phone. IDLC also provides mobile bills to its employees.

18. Housing loan- Employees can apply for house loans after meeting some conditions, and it
comes with a 15% equity investment and a 20-year loan tenure. The highest amount of this loan
must not exceed the amount according to the policy.

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19. Personal loan- IDLC offers employees personal loan with lower interest rates. The highest
amount of the loan can be around BDT 500,000.

20. Motor bike loan- Some employees of selected grades can apply for motor bike loan, and they
need to fill up some standard before applying.

Recognition Awards

Recognition awards are given to the employees of a company to appreciate, and motivate them.
IDLC also follows this, this organization arranges some recognition awards to appreciate brilliant
performance of the employees. Three types of awards are provided-

Spot Award: The immediate award for day to day activities for special contributions of the
employees is called a spot award. Spot award is given by HR of IDLC for any of the activities
below-

 Project in a short time

 Exceptional task
 Outstanding efficiency
 Specific event
 Act of heroism

Integrity Award: IDLC is recently providing Integrity Award to support the National Integrity
Strategy guided by Bangladesh Bank. An employee putting best effort in his/her performance with
honesty, and showing good behavior according to IDLC rules, then that employee is entitled for
integrity award. He/she receives a certificate and prize money for the award.

Long Service Award: The employees served for 15, 20 or 25 years receive Long service award.
IDLC celebrates their long journey to appreciate them, and to encourage other employees.

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 Recommendation
IDLC is one those companies that can be looked upon by other companies in practicing a proper
HR system. The Human resource department at IDLC always shows rational decision making in
setting up the salary and the compensation package with the other work related facilities. From the
research, it was found that IDLC finance limited follows an international standard in the
determining the compensation package. All the necessary factors are considered while preparing
the package. A very few organizations provide the employee friendly compensation package.
IDLC is very concerned about its image, and the employees’ rights and facilities. This research
shows that, IDLC ensures all sorts of employee friendly facilities in the context of Bangladesh.
One of the reasons of IDLC being a desirable organization to the job applicants is the compensation
package. Most of the employees are satisfied with the compensation policy, and as a result the
turnover rate is improved there. IDLC needs to continue providing such facilities to keep satisfying
its employees, and thus maintain a good reputation in financial institution sector in Bangladesh.

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 Reference

1. Idlc.com. (2019). IDLC Finance Limited - Loans, Deposits, SME and Corporate Finance.
[online] Available at: https://idlc.com/.

2. idlc.com. (n.d.). Why corporate training is getting increasingly popular in financial

institutions and local corporate bodies? [online] Available at:
https://idlc.com/mbr/article.php?id=243 [Accessed 10 Jan. 2022].

3. Glassdoor. (n.d.). IDLC Finance Reviews. [online] Available at:

https://www.glassdoor.com/Reviews/IDLC-Finance-Reviews-E433059.htm [Accessed 10 Jan.
2022].

4. Scribd. (n.d.). IDLC Finance LTD | PDF | Recruitment | Performance Appraisal. [online]
Available at: https://www.scribd.com/document/473832137/IDLC-Finance-Ltd [Accessed 10
Jan. 2022].

5. Anon, (n.d.). IDLC Finance Limited – United Nations Environment – Finance Initiative.
[online] Available at: https://www.unepfi.org/member/idlc-finance-limited/ [Accessed 10 Jan.
2022].

6. Wikipedia Contributors (2019). IDLC Finance Limited. [online] Wikipedia. Available at:
https://en.wikipedia.org/wiki/IDLC_Finance_Limited [Accessed 20 Dec. 2019].

The End
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