Bangalore, Jan. 2
WAGE bills for the public sector insurance companies have increased with the Ministry of Finance notifying the hike in salaries last week.
Sources said the wage increases were done with retrospective effective from August 2002. As a result, the balance sheet impact of the wage settlement is likely to range between Rs 200 and Rs 300 crore depending on the employee strength of the insurance companies.
The least impact would likely be on Oriental Insurance Company Ltd (OICL) and the highest impact on New India Assurance Company Ltd, which currently has the largest workforce.
However, despite the large size of the settlement, none of the four public sector insurers' balance sheets would likely be affected significantly by the new settlement.
Mr M. Ramadoss, Chairman and Managing Director of OICL, said: "The liabilities are fully provided for." Insurers have made provisions for up 80 per cent of the liabilities. This year the provisions are likely to be up about Rs 50-60 crore for each of the insurers on this account.
Transfer policy:But the new wage settlement is actually likely to be a blessing in disguise for the insurers. For the insurers, the sources said, this was one of the rare occasions when the settlement was in their favour. This was despite the large size of the wage bill.
One of the factors that has been included in the settlement pact with the unions was a transfer policy of employees as part of office/branch rationalisation. This rationalisation would result in shutting down of some of the offices in the urban and metro zones and could further trim the establishment expenditure that also included wages.
VRS on an anvil:The sources said the wage settlements would also be followed up with one more round of voluntary retirement scheme (VRS).
The last round of VRS scheme, the sources said, failed to meet the desired objectives of trimming the workforce. PSU insurers currently have a workforce of close to 7,000 employees. In fact, the target was the clerical and Class III staff. Instead, the bulk of the VRS applicants were from the officer cadre. As a result, insurance managements were unable to proceed with the rationalisation of its branches and the augmenting of rural offices.
Armed with a transfer policy now, the sources said, insurers intended making the VRS more effective in future for targeting the clerical and Class III staff. This was to make the PSU insurers more lean and mean, like private sector counterparts.
No date has been specified for a future VRS, but current indications are that the VRS for officers and subordinate staff was likely to be offered some time during the next financial year. This way, the sources said, the wage costs of the PSU insurers would actually come down despite the recent round of increases.