Westpac has changed the way it pays staff who interact with customers, whether it’s in a branch or over the phone, choosing to drop controversial commission payments in favour of paying them a fixed salary.
The move -- intended to eliminate the conflict between sales targets and a customer’s best interests -- was recommended to the industry after a special government inquiry, and goes one step further than CBA, NAB and ANZ.
Why does it matter if branch staff were paid commissions?
The commissions paid to frontline workers have been in the spotlight for the last few years, culminating in a series of recommendations made in a final report commissioned by the Australian Banking Association, and handed down against the backdrop of 2017’s banking Royal Commission.
“...Some current (commission) practices carry an unacceptable risk of promoting behaviour that is inconsistent with the interests of customers and should be changed,” Stephen Sedgwick wrote, in his final review of Retail Banking Remuneration.
“... Incentives have at least appeared to drive behaviour that was not in the best interests of customers and, on occasion, scandalously so.”
The 21 recommendations of his review were mostly adopted by the banking industry, but to various degrees.
‘We’re making an industry leading move’: Westpac
Westpac announced yesterday it has eliminated incentive payments for its customer-facing employees, and instead is replacing them with a permanent fixed pay increase.
“Introducing a fixed pay increase and removing short term variable incentives for more than 4,000 branch and customer care roles will help give our customers confidence that the service they receive is wholly focused on their banking needs,” Richard Burton said, the acting chief executive of the bank’s consumer division.
“...This decision will provide these employees with more certainty around their remuneration and recognise the individual service they provide to customers.”
Westpac eliminated sales commissions for branch tellers in 2016, and removed all other commissions for 2300 staff in 2019, replacing them with a $500 annual increase.
The new agreement extends the changes to other staff who deal with customers, such as phone operators, by replacing other incentives with fixed pay increases, Mr Burton said.
The changes will affect Westpac’s subsidiaries as well, including St George, Bank of Melbourne,and BankSA, when the new remuneration agreement takes effect on October 1.
Do CBA, NAB and ANZ pay their staff commissions?
All big four banks pledged to follow the recommendations of the “Sedgwick report” following its publication in April 2017. Most typically do pay commissions, but they've reworked how they are calculated and are mostly not based on sales performance.
Commonwealth Bank stopped paying its branch and contact centre staff commissions that are purely based on financial outcomes, the bank confirmed.
“We implemented the Sedgwick review recommendations in 2017 and de-linked sales to performance for our banking tellers in branch,” a spokeswoman told RateCity.
“This means we primarily focus on the individual’s contribution to providing exceptional customer service, rewarding them for delivering better customer outcomes, not financial outcomes.”
Other CBA branch staff have their performance evaluated based on a 'customer service' metric.
“We have a balanced scorecard approach to performance assessment,” the spokeswoman said. “This is largely related to managers assessing employees in relation to customer service and not sales.”
NAB’s branch and contact centre staff don’t have individual targets, but they do have collective targets, a spokeswoman confirmed, and some roles receive commission payments.
The majority -- 98 per cent -- of staff performance is linked to a “group” target. The spokeswoman did not account for the remainder.
The bank measures frontline staff performance using a scorecard, and no single criteria has a weighting greater than 33 per cent, the spokeswoman said, adding this bested the recommended guidelines.
“NAB is continually reviewing its approach to performance and reward frameworks to ensure they drive the right values and behaviours and deliver positive outcomes for customers,” she said.
ANZ’s approach is similar to NAB’s in that it no longer sets individual sales targets for its in-store staff. Instead, it typically has team targets for branches, the bank confirmed.
But with store traffic on the decline due to the COVID-19 pandemic, the targets have been changed to cover regions.
These key performance metrics are not tied to any commissions, a spokesman told RateCity, adding they consider “all outcomes with equal weighting” during reviews.
“ANZ moved to team based targets for generalist bankers in branch settings in 2018,” he said.
“As a result, financial performance is now assessed as a contribution to team outcomes rather than individual performance against sales goals.”
The incentives don’t just apply to staff in a bank at ANZ. The spokesman confirmed they also apply to phone staff interacting with customers.