INDUSTRIAL COURT OF MALAYSIA BETWEEN KESATUAN PEGAWAI-PEGAWAI STANDARD CHARTERED BANK MALAYSIA BERHAD, SEMENANJUNG MALAYSIA

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1 INDUSTRIAL COURT OF MALAYSIA CASE NO: BETWEEN KESATUAN PEGAWAI-PEGAWAI STANDARD CHARTERED BANK MALAYSIA BERHAD, SEMENANJUNG MALAYSIA AND STANDARD CHARTERED BANK MALAYSIA BERHAD AWARD NO: 295 OF 2017 CORAM: Y.A. DATO MARY SHAKILA G. AZARIAH - CHAIRMAN MR. HENRY ASOKAN A/L DAVID - EMPLOYERS' PANEL MR. NADARAJAN A/L SUNDARAJU - EMPLOYEES' PANEL VENUE : Industrial Court, Kuala Lumpur DATE OF REFERENCE : 19 August 2013 DATES OF MENTION : 7 October 2013, 12 November 2013, 27 November 2013, 6 January 2014, 20 January 2014, 10 February 2014, 10 March 2014, 8 April 2014, 21 April 2014, 26 May 2014, 9 June 2014, 25 June 2014, 16 July 2014, 9 March 2015, 30 March 2015, 24 June 2015, 29 June 2015, 3 September 2015 and 18 January 2016 DATE OF HEARING : 1 June 2016 DATE OF ORAL SUBMISSION : 14 July 2016 REPRESENTATION : Mr. Muhendaran of Messrs. Muhendaran Sri, Counsel for Union. Mr. Sivabalah and Ms. Reena of Messrs. Shearn Delamore & Co, Counsel for Respondent/Bank. REFERENCES: This is a dispute under Section 26(2) of the Industrial Relations Act 1967 ( the Act ) between Kesatuan Pegawai-Pegawai Standard Chartered Bank Malaysia Berhad, Semenanjung Malaysia (hereinafter referred to as the Union ) and Standard Chartered Bank Malaysia Berhad (hereinafter referred to as the Respondent/Bank ). (1)

2 AWARD This is a trade dispute between Kesatuan Pegawai-Pegawai Standard Chartered Bank Berhad, Semenanjung Malaysia (hereinafter referred to as the Union ) and Standard Chartered Bank Malaysia Berhad (hereinafter referred to as the Respondent/Bank ) over the terms and conditions of service to be contained in the 2nd Collective Agreement between the parties (hereafter referred to as the CA ) for the period from 1 August 2012 until 31 July 2015 in relation to the officers in the grade of Assistant Officers. At the commencement of the Hearing both the Union and the Respondent/Bank informed the Court that they have agreed to some of the provisions in the said CA except the following namely Article 17/Appendix C (Rates of Pay), Article 18 (Annual Leave), Article 34.1 (Date of Implementation), Appendix D (Salary adjustment and Implementation), Article 25 (Annual Leave and Article 28.3 (Medical Benefits for Officer's Family. Outpatient Hospitalization). (2)

3 Both the parties led evidence on the Disputed Articles (enumerated herein-below) through their witnesses viz, the Union witness to testify was the Union's former Secretary-General (UW) and that for the Respondent/Bank was its Head Employee Relations, Malaysia (RW). Article 17 - Appendix C UW testified that the Union is proposing the minimum salary of RM3, to a maximum of RM7, on the basis that it would be more attractive to new recruits and attract prospective employees. It was his testimony that the minimum salary should be RM3, based on the Malaysian Instruction Circular No. 2015/13 which states that the Personal Loan Schemes requires a minimum income requirement of RM36, in order to qualify for the same. It was the Union's testimony that maximum salary should be increased to RM7, on the premise that that 2 months-contractual bonus had been incorporated into the salary with effect The Union proposes that the revision in the salary range shall take effect from the date of expiry of the 1 st CA that is 1st August (3)

4 RW testified that the Respondent/Bank's proposal for the minimum and maximum salary should be RM2, for the minimum and that the status quo be maintained as per the 1 st CA for the maximum that is that be maintained at RM6, It was RW's testimony that the Respondent/Bank's proposal was the range was comparable to the terms enjoyed by the staff in comparable categories of other establishments in the banking industry. He referred to the table which showed the salary range of staff in allegedly comparable categories from Maybank, HSBC as well officer 11 Grade employees from other Banks who fall within the scope of the representation of the Association of Bank Officers Malaysia (ABOM). He testified that the Respondent/Bank's proposal of a minimum of RM2, is clearly higher than the current going rates. Having perused the testimonies and heard submissions from the parties the Court finds that the Union has failed to substantiate its proposal for the minimum and maximum salary to be increased to RM3, and RM7, respectively. At the same time the Court agrees that RM2, as proposed by the Respondent/Bank may not be enough to attract talent for the job from outside that is the qualifications and experience required (4)

5 for the job not forgetting the duties and responsibilities of the job. The Court agrees with the Union that there must be an increase but not to the tune that is suggested by the Union for the minimum. The Court is required to also consider and does consider the financial implications and the effect of its Award on the industry practice and the cost of living for the period covered by this CA. Having compared the existing salaries and salary scales with that of Maybank and HSBC as well the Court finds that the minimum should be increased to RM2, It must be stressed that the Court has also based its findings on the 3 years Consumer Price Index (CPI). Accordingly the Court finds that the maximum salary should accordingly be increased by RM that is pushing the maximum to RM7, The Court agrees with the Respondent/Bank's submission that there is no basis to rely on the Malaysian Instruction Circular No. 2015/13 to justify that the Union's proposal that the minimum salary under the new CA should be increased for the minimum to RM3, to a maximum of RM7, The Court is in agreement with the Respondent/Bank that the rates cannot be (5)

6 increased arbitrarily and that it must commensurate with the value for the job. With regards to article 17.2 it is the Court's view that the new rates of pay be implemented in accordance with Section 30(7) of Industrial Relations Act 1967 that is it shall not be earlier than six months from the date on which the dispute was referred to the Court. Article 18 Annual Increment On the facts it is noted that the 1st CA provides that effective from 1 August 2009 the current rate of Annual Increment is 4.5.%. The Respondent/Bank's witness testified that a total of 6.01% salary increment had been made in average from 2010 to 2012 over and above the fixed annual increment of 4.5%. He testified that this meant that the employees have been receiving additional percentage increment via Internal Rewarding Mechanism together with the Fixed Annual Increment of 4.5%. Hence it was the Respondent/Bank's contention that the employees received total Increments of 6.07% in 2010, 6.79% in (6)

7 2011 and 6.65% in What the Union proposes is an increment of 6% of the basic salary as at 31 December of the previous year. The Respondent/Bank also proposes that the annual increment should not be solely based on a fixed element but subject to individual performance and should be payable with effect from 1 April of each year commencing in the subsequent year from which the Award of this Honourable Court is handed down. The Union proposes that the step-ladder principle should be adopted. The Court is reminded that annual increment granted to employees is not intended to absorb inflation or rises in the cost of living; rather it represents the added value of the employee in terms of skill and experience, to the employer (Association of Bank Officers, Peninsular Malaysia v. Malayan Commercial Banks Association [1981] 1 ILR 136). As a general rule the quantum of the added value of the employee should not exceed 5% of the salary per annum and the Court shall observe this principle in determining the rates of annual increments in this Award after taking into account existing incremental rates in (7)

8 Banks, the Union's proposal and that of the Respondent/Bank's counter- proposal. Having considered the submissions of the parties the Court is of the view that an annual increment of 4.9% will be fair and equitable and that the step-ladder principle should be adopted. The Union's case that it should be higher is not convincing especially as GST would not have been introduced then. Further the Court is not in farvour that Productivity Linked Wage System should be introduced and be the basis for increment as proposed by the Respondent/Bank. The Court is not convinced that this would provide an equitable basis for increments and will in fact benefit the employees although RW have sought to convince the Court on the merits of adopting the appraisal system to determine the increment factor ranging from performance review up to the performance assessment stage of each individual employee. The Court makes reference to the case of HSBC Bank Malaysia Bhd. v. Persatuan Pegawai-Pegawai HSBC Bank Malaysia Berhad Semenanjung Malaysia (2001) 1 ILR 759 where it was held that there remains an element of uncertainty in a service industry like a Bank as opposed to a product related industry, because one cannot quantify in definite (8)

9 terms the standard of service or quality of service rendered by individual workers. In a service industry however fair or reasonable the management and the appraisers claims to be the suspicions and accusations will always be that those few actually deserving a good rating are accused of being the favorites to the boss. In making its Award the Court has regard to public interest, the financial implications and the effect of the Award on the economy of the country and industry concerned and also to the probable effect in related or similar industries. As stated in the case of Malayan Agriculture Producers Association v. National Union of Plantation Workers (Industrial Court) (Award No. 8/1968 in I. C. Cases No. 7 and 9 of 1967) where it was stated that: In considering any revision of a wage system or wage structure it is well settled that justice should be done to the interest of not only of the workers but also of the employers. On the side of the worker the object of constituting a wage structure should be to ensure that (9)

10 he obtains a wage for his labour. On the side of the employer his consideration bearing in mind inter alia that it is right that he should be allowed a fair allocation from profits to reserves and depreciation and a fair return for his capital; A fair wage has been stated to be a mean between the minimum or subsistence wage and the living wage. It is a wage which could be enhanced in gradual stages towards the progressive realisation of the ideal of a living wage that is to say a wage sufficient to provide not only the absolute essentials of food, shelter and clothing but also for insurance against old age and misfortunes and for a condition of frugal comfort; Any decision as to the stage or level at which the fair wage ought to be is dependent inter alia upon; (a) the productivity of labour employed by the industry ( 10 )

11 (b) comparable wages in comparable concerns in the same regions; and (c) the present capacity of the industry to pay and its prospects in the near future. This shall be implemented on the basic salary not earlier than six months from the date on which the dispute was referred to Court. It is trite that the notion of yearly increments represents the added value, skill and experience the employees accumulates which has some bearing on the increased efficiency and output or production of the employer. The generally 3-year cycle of upward salary revision or salary adjustment is to cater for the rate of inflation during the period and meant to cover the increase in the cost of living that is indicated by the CPI. It is also trite that there is this principle of rate for job that makes comparison with compatible or similar industries to try and achieve some degree of uniformity or parity in the market for rates of pay of various ( 11 )

12 categories of officers within the same grade doing almost the same kind of job. It is said that any disparity shown might reflect a weakness to particular employers who are unable to move with market conditions due to individual constraints. Having said this the Court stresses that the facts and circumstances of a particular case may warrant a departure from these principles. Appendix D - Salary Adjustment The Respondent/Bank's witness testified that over the years relevant adjustments had been made to the employees' salaries based on the Consumer Price Index (CPI) to take into account the increased cost of living. The Respondent/Bank proposes an adjustments of 4.2% on the basic salary as at 31 July The Union proposes excessively 15% salary movement based on the salary as at 31 July When deliberating on the salary adjustment the Court has taken into consideration the financial capacity of the Respondent/Bank and as well as the prevailing CPI then and the Court is of the opinion that a salary adjustment of 4.2% should be awarded. The Court is guided by the fact that the general 3-year cycle of upward salary revision or Salary ( 12 )

13 Adjustment is to cater for the rate of inflation during the period and meant to cover the increase in the cost of living that is indicated by the CPI and traditionally calculated on the basis of 60% or 2/3 of the average CPI rating over the 3 year period (Malayan Commercial Banks Association v. National Union of Bank Employees [1989] 1 ILR 58). It is the Court's considered view that the Union's proposal is far to excessive unsubstantiated and if implemented will have serious implications on the Respondent/Bank. It is without justification. Although references were made to salary adjustments that of Maybank, HSBC and ABOM but the Court is reminded that these were negotiated Collective Agreements and were subject to trade-offs by the parties. These comparatively are larger Banks and perhaps are not the best examples to follow and accordingly no basis for comparison. The Court is reminded that to a large extent in general rates and wages to be considered are rates and wages prevailing in comparable concerns in the same industry in the same region and not concerns in the same industry which are in different regions or concerns in the same region which are in different industries or concerns which though they are in the ( 13 )

14 same industry are not proper for comparison by reason of their being too large and their having a much bigger capital. Hence the Court agrees with the Respondent/Bank's counsel that the Court ought not follow the Union's request which is really arbitrarily arrived at. In Malayan Banking Berhad v. Association of Maybank Officers (1988) 2 ILR 350 it was held that the Court has to follow the general principles of wage fixation it has established over the years. It cannot throw overboard these principles. It is the Respondent/Bank's submission that the financial position of the Respondent/Bank is not as strong as that of the other commercial Banks. The Respondent/Bank has submitted its financial statements for 2012, 2013 and 2014 for Maybank, CIMB, HSBC and for itself which shows the comparison in profits made in support thereof. This is an important consideration as it relates to financial capacity to pay. ( 14 )

15 Accordingly the Court orders that based on the aforesaid principles of wage fixation and having perused other comparable Collective Agreements of comparable establishments Company pays a salary adjustment of 4.2%. Court opines to be fair and equitable. the This is what the With regards to those workers who have reached their maximum of their scale of the new salary range the employee shall not be entitled to continue to receive the annual increment for the duration of this CA or of this Award. Article 25 Annual Leave The dispute over this Article is in essence the Union's opposition to the Respondent/Bank's proposal for new employees who are to join upon the expiry of the current 1 st CA effective from 1 August 2009 to be eligible for 22 days of annual leave. The Respondent/Bank proposes that the current employees will continue to be eligible for 30 days on a personal-to-holder basis. It was the evidence of RW that this proposal was premised on the fact that the Respondent/Bank was previously subject to a 6-day working week and as the employees are no longer required to work a 6-day week there shall be no adjustment made to the ( 15 )

16 annual leave entitlement resulting in the employees maintaining 30 days annual leave in addition to the extra 52 off-days in a year. It was his contention that the current annual leave is too high and unjustified as employees also enjoy increased public holidays and this generates unproductivity. The Union contends that the employees must continue to enjoy a 30 days per annum annual leave. He contends that the working hours remain 5 days working week. It is his contention that there is no extra 52 offdays in a year for the employees as claimed by the Respondent/Bank as the half day on Saturday is replaced by increasing the working hours from Monday to Thursday by an hour. Having considered the equities here the Court opines that the status quo under the 1 st CA for the provision of annual leave should be maintained. structure proposed The Court finds that the 2-tier leave by the Respondent/Bank will be discriminatory and that every employee whether new employees or not will be subject to the same number of working hours and should enjoy the same number of annual leave as employees of the Respondent/Bank covered by the same CA. To obviate disharmony within the Respondent/Bank the Court has decided accordingly. ( 16 )

17 Article 28.3 The Union proposed an increase of the medical benefits as the cost of medical treatment has gone up significantly and that the current rate of RM3, has been there since 1 August The Respondent/Bank proposes to maintain status quo. The Union submits that the age of children covered by the CA should be increased from 21 years to 23 years. There is scant justification however given by the Union in support of what they are asking. The Respondent/Bank submits that this increase in age is unprecedented. When cross-examined UW agreed that what they proposed was more than what other Banks were offering to their employees. RW also agreed that under the current collective agreement insurance was provided for to the workers by the Respondent/Bank. The benefits of club and healthcare under Agreement. are not provided for the 1 st Collective No justification has been provided for this by the Union. Taking into account the evidence of both the Union and RW and looking at the provisions for medical benefits by other Banks the Court agrees with the Bank that the request for an ( 17 )

18 increase in amount and coverage has no basis and that it would be fair and equitable to maintain the status quo for the proposed CA. This is the Court's ruling. Duration and Effective Date (Article 34.1) Section 14(2) of the said Industrial Relations Act 1967 empowers the Court to specify the period the CA shall continue in force viz which shall not be less than 3 years from the date of commencement of the CA. Stability in Industrial Relations is required at least a period of 3 years. The Court is therefore of the view that this proposed CA should be for a minimum period of 3 years from the date of commencement viz 19 February 2013 in accordance with section 30(7) of the said Industrial Relations Act ( 18 )

19 Conclusion Section 30(4) of the Industrial Relations Act 1967 requires that: In making its Award in respect of a trade dispute.. Court shall have regard to the public interest, the financial implications and the effect of the Award on the economy of the country and on the industry concerned and also to the probable effect in related or similar industries. The Court is guided by this provision and the arguments and evidence that has been tendered before it. Section 30(5) of the said Industrial Relations Act 1967 further states that the court shall have regard to equity, good conscience and substantial merits of the case without regard to technicalities and legal form in arriving at its Award. Hence some of the asking of the Union and the Respondent/Bank has been rejected by the Court in the interest of equity and good conscience. ( 19 )

20 Having determined all the disputed articles and taking into consideration the agreed items annexed herewith as the First Schedule the Court now makes its Award in terms of this Award and the First Schedule (which forms part of this Award) and in terms of the paragraphs herein before stated as to the disputed articles of this CA. HANDED DOWN AND DATED THIS 20 DAY OF FEBRUARY 2017 Signed ( DATO MARY SHAKILA G. AZARIAH ) CHAIRMAN INDUSTRIAL COURT, MALAYSIA KUALA LUMPUR ( 20 )

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