B.Oyungerel, Director of Retail Banking Division: Xacbank’s Cumulative deposit scheme represents one of the HR mechanisms for the retention of the key employees in a company, which ensures long-term commitment and productivity on the part of the employees
Retention and motivation of employees has recently become an important issue, with which the companies are faced. There have been many trainings and advices on these issues, but the outcome is modest.
Introduced by XacBank the Cumulative deposit scheme, substantially contributes to addressing the above issue. We sought elaborations on this service from Ms.B.Oyungerel, Head of the Mortgage Department of XacBank.
Good morning. I understandthat the Cumulative deposit account is a new product in the market. Could you describe how it works and why it began attracting companies’ interests?
Good morning to all the readers. This product is a combination of the interests of both the company and its employees. For a company, an employee’s leaving the company will not result in direct monetary damage. However, the company has already spent a great deal of money on the employees training and re-training. Also, the knowledge and skills of a new employee tend to be much lower compared to that of an experienced employee, with the resulting decline in the overall productivity and performance of the company. On the other hand, the employees seek to gain from their loyalty to the company and accumulate savings.
We have studied these trends and prepared the Cumulative deposit account scheme, which meets the interests of both sides.
An account is opened in the name of an employee, with the monthly installments of any amount payable by the employee from his/her salary, and the same amount payable by the company and accumulated in the Cumulative deposit account. After certain period the employee becomes eligible to withdraw the amount cumulated by the company and the employee. The terms and conditions for such accounts shall be agreed upon by the company and employees, without the bank’s participation.
Why the terms and conditions for the Cumulative deposit accounts is a matter of an agreement between the company and the employees?
Bank is in no position to determine the employment conditions for an organization. Dependent on the factors such as the size, type of activities, the number of employees and HR policies, companies may set the terms and conditions of their own. For example, a company may require that withdrawals from the Cumulative deposit account be limited to the cases where an employee is to undertake a training. Also, it may be stipulated that withdrawals may be made for down payments in connection with housing loans, or for maternity leave. Generally, the terms and conditions of the agreement should reflect intrinsic interests and aspirations of a given company and its employees.
Accumulation of savings during the employment provides good opportunities to the employees.
After graduating from colleges we join various organizations, and before you know it, we will have worked for years. You feel you need to improve knowledge and pursue a degree, for which funding is required. In situations like this, many seek better remunerations and opportunities outside the company. Contrarily, with the Cumulative deposit savings, an employee is encouraged to save in easy installments, and committed to the company.
Is interest paid on deposits? In 10 years, what would be the amount of savings?
Interest at agreed rate will be payable. For example, in 10 year period, the saving of an employee with the current monthly salary of MNT 1 million, with further annual increase by 15 percent, will reach the amount of MNT 38.6 million, provided that the selected amount of monthly installments, to be made by the company and the employee, is 5 percent of the salary. Of this amount, MNT 17.2 million is bank’s compound interest, MNT 10.6 million has been accumulated from the employee’s salary, with another MNT 10.6 million accumulated by the company in the employee’s name. This example shows the advantage of the Cumulative deposit scheme.
It is a rewarding scheme. With the savings, do the employees become eligible for mortgage loans?
Yes. For young people, purchasing a separate housing is an important part of independence. Due to limited availability of money, many have to apply for bank credits, which require that certain amount of down payment be made by the applicant. Banks also look at the applicant’s employment record and availability of savings. Therefore, the Cumulative deposit account holders are exempt from all these problems, as any bank approached for a mortgage loan will assess a holder of Cumulative deposit account as a reliable and eligible customer.
Thank you for your elaborations on the Cumulative deposit scheme.
Thank you for your interest in our new product. It is important to note that the Cumulative deposit scheme does not seek to serve the interests of any single party. It is beneficial to both the company and its employees, by eliminating disruptions in corporate operations on the one hand, and ensuring easy saving opportunities on a daily basis, on the other hand.
