A hot job market is prompting some large banks to raise their minimum wages, continuing a trend that will likely force many smaller competitors to pay up for employees.
The latest bank to increase the low end of its pay scale is Truist Financial, which said Wednesday that it will raise its minimum hourly wage for U.S. employees to $22 starting in October, up from a prior range of $15 to $18. Truist’s announcement followed Bank of America’s just-enacted $22 minimum hourly wage, which the bank plans to raise to $25 by 2025.
JPMorgan Chase, the country’s largest bank by assets, also started notifying its employees last month that its minimum wage is rising to between $20 and $25 an hour, depending on the worker’s location. That range is up from $18 to $22 per hour and is part of the bank’s steady increases in pay, a spokesperson said.
The wage increases come as a tight U.S. labor market — and high inflation — are forcing employers’ hands.
The pressure to retain employees is not “going away anytime soon,” and neither is the need to offer competitive pay and benefits, especially greater flexibility and professional development opportunities for customer-facing employees, said Casey Schaffer, a consultant at the firm Capco.
“Being able to turn that attrition into attraction is going to be incredibly valuable,” said Schaffer, the firm’s head of talent and culture transformation.
Banks have described the wage increases as critical investments in their workers, who could leave for better-paying jobs as employers across a variety of sectors battle for talent.
Better pay reduces employee turnover and boosts customer satisfaction by providing consumers with “a premier experience,” said Lynn David, CEO of Community Bank Consulting Services.
“When you have turnover, you don’t have trained people,” David said.
But higher wage expenses may also weigh on banks’ earnings this year, at least somewhat. Compensation will likely be a “wildcard” when the industry starts reporting its quarterly results next week, said Christopher Marinac, director of research at Janney Montgomery Scott.
Wage increases may push up costs, but other factors could offset some of that pressure. As examples, Marinac pointed to a seasonal decline in bonuses from the first quarter, employee reductions because of branch closures, having fewer staffers in branches and layoffs in struggling mortgage divisions.
Banks that have lagged competitors on pay will likely have to play catch-up at some point, Marinac said.
“There are a handful of banks trying to lead on this issue,” he said. “Everyone else has to follow. You have to stay competitive.”
Banks that have raised the bottom end of their pay scales in the past year include the $1.9 trillion-asset Wells Fargo, where the minimum wage went up to between $18 and $22 earlier this year. Citigroup raised its minimum hourly wage to between $18 and $20.
Cincinnati-based Fifth Third Bancorp and Stamford, Connecticut-based credit card issuer Synchrony Financial both hiked their minimum hourly pay to $20. Chicago-based BMO Harris Bank and Pittsburgh-based PNC Financial Services raised theirs to $18.
Across the industry as a whole, average pay to tellers at financial institutions rose by 4% between May 2019 and May 2020, and by 6% over the following 12 months, according to data from the U.S. Bureau of Labor Statistics.
Wage increases will be critical to banks’ front-line employees, who are being hit hard by the 40-year high in inflation and a rapid increase in gas prices for their commutes, said bank consultant Dave Martin, founder of bankmechanics.
While a minimum wage upwards of $20 or more grabs headlines and attention, there is much more banks need to do to keep employees engaged, he said. “It’s culture, it’s other possible perks. It’s ‘What’s the chance of advancement?’” he said.
Those areas are where smaller banks may have an advantage, said Schaffer, the Capco consultant. She noted that it may be easier for such banks than their larger competitors to give employees a strong connection to their workplace and a clear mission.
“They do know their people, they do know what those values are that are going to be meaningful from the bottom up, and not just from the top down,” Schaffer said.