Banks bump wages, offer perks to attract workers

Minnesota’s Bridgewater Bank is bumping its base pay to $20/hour and touting other perks, including happy hour socials for lenders.

Longtime Iowa community banker Darlys Hulme is well aware of the challenges community banks face in attracting and keeping employees. Hulme, president of Farmers Savings Bank & Trust in Traer, noted her organization recently increased starting teller wages from $15 to $19 per hour, a change she expects will be permanent as the bank continues seeing fewer younger candidates apply. Compounding the issue, other employers are trying to hire away her top-level employees, forcing her to also bump officer salaries to retain talent.

“Where are they? I don’t know,” she said of the lack of younger applicants. 

Hulme’s reality is one being felt by community banks big and small: The tight labor market and expanding responsibilities expected of frontline workers have placed pressure on bankers to raise salaries and be more proactive in hiring and retaining talent. 

Twin Cities-based Bridgewater Bank moved its starting wage to $20 per hour for all regular, full-time workers in August, an increase the financial institution deemed necessary to keep entry-level employees on board and foster a positive work environment. That change brings Bridgewater’s minimum hourly wage to well above Minnesota’s baseline standard of $10.08 for large employers and $8.21 for others. Bridgewater President and CEO Jerry Baack noted that Bridgewater’s Strategic Leadership Board had discussed how the organization differentiated itself through its offerings and other amenities in a competitive environment, including showing their entry-level employees their value to the organization.

The Federal Reserve’s July Beige Book revealed a growing share of employers raising wages by 3 percent or more. Numerous contacts also reported additional incentives, including hiring and retention bonuses and tuition reimbursement. 

According to the 2021 Bank Director Compensation Survey of 282 independent directors, CEOs, human resource officers and other senior executives of U.S. banks with less than $50 billion in assets, conducted in March and April, 22 percent of banks in the $250 million to $500 million in assets range said retaining key people was a top compensation challenge. That number spiked to more than half of banks with between $500 million and $1 billion in assets, decreasing again to 29 percent for banks with $1 billion to $10 billion in assets. Thirty-six percent of banks with $250 million to $500 million in assets reported that recruiting young talent was a top compensation challenge.  

“We would rather be ahead of the curve too, I think, with the wage accrual at the lower end of our staff, or what we’d consider our entry-level staff levels,” Baack said. “I think there’s going to be continual pressure on that sector.” 

Brandon Koeser, financial services senior analyst at the consulting firm RSM, noted there is less than one unemployed person for every job opening, placing potential job seekers in a powerful position to command higher salaries. “They know they have a leg up because of the demand,” Koeser noted. 

The evolving front line 

According to a 2019 report from McKinsey & Co., starting wage increases come as the talent that banks seek — people who help the institution build needed digital, automation and analytical capabilities — is in high demand. According to McKinsey, banks will not succeed unless they also develop their current employees through teaching new and additional skills. 

Koeser said having traditional tellers be cross-trained in other aspects of the business can save community banks money through cross-selling wealth management and insurance transactions. Those transactions can also grant community banks more meaningful customer engagement.  

Steve Williams, president and partner at the banking consulting firm Cornerstone Advisors, said community banks “have no choice” but to acknowledge that their labor costs will increase in the coming years, especially with the ever-increasing responsibilities frontline tellers have in preventing fraud, regulating payments, holding checks and conducting other tasks. 

Dan McGuire, chief human resources officer at Mason City, Iowa-based First Citizens Bank, believes those upward salary trends could be permanent. During the pandemic, his $1.4 billion financial institution, which employs approximately 210 part- and full-time workers in its eight branches, has focused on retaining employees and using technology to take care of customers, avoiding furloughs in the process. During the last few months, that emphasis has shifted to recruitment as several employees retired. To address that need, First Citizens Bank has used social media and pitched its community-oriented nature to recruit potential employees. Starting wages for bank tellers start at $13 an hour, but that number can increase depending on the employee experience and beginning roles. (Minimum wage in the state matches the current federal standard of $7.25 an hour). McGuire said discussion on increasing the bank’s minimum rates would take place this year. 

Non-salary benefits a lure 

The base wage battle also includes the nation’s largest banks. Retail bank Wells Fargo has raised its minimum wage to $15 to $20 per hour depending on employee location. Fellow banking giant Bank of America has raised its minimum wage to $20. Both plan to have their U.S. minimum wages be at $25 per hour by 2025. PNC is increasing its minimum hourly pay to $18. Competition even stretches to the personal financing app world: Dave, a challenger bank and personal finance app launched in 2017, adjusted its work structure during the earliest days of the pandemic, allowing employees to work from home and relocate to cities outside of the fintech’s Los Angeles headquarters. The fintech also implemented a national pay scale for all employees based on the California labor market, regardless of where their employees work. 

Community bankers say they are also aware of the necessity of non-financial perks in attracting and retaining employees. During an Aug. 7 roundtable at the 2021 Independent Community Bankers of Minnesota convention, Village Bank President Aleesha Webb said her bank’s “villager” mindset is key to building a team-based environment and attracting and retaining employees. As part of that mindset, her bank stresses the importance of forging relationships and making personal investments in local communities. She said her Blaine, Minn.-based institution has raised 401(k) matches and frontline banker pay to attract employees. Still, the bank has had a hard time attracting young employees: Webb noted the last six teller hires have all been approximately 60 years old. 

Candy Allard, assistant vice president and human resources specialist at Badger Bank in Fort Atkinson, Wis., said she has informed applicants of the bank’s employee stock ownership program and flexible scheduling. Also, bank leaders have discussed offering tuition reimbursement and additional vacation days for special events like birthdays. Even with those benefits, she still finds more success in hiring employees who are in their mid-40s to early-50s and more financially secure than younger applicants. 

Allard noted the minimum wage increases at larger banks and big box stores still place Badger Bank at a competitive disadvantage for young employees. The locations of the four Badger Bank branches, between Madison and Milwaukee, also pose challenges. Some potential hires have opted to drive the extra distance to Madison and Milwaukee to make more money. 

According to the McKinsey report, banks facing similar pressure are turning to unexpected sources. In some instances, minimum experience requirements were removed to ease what were once considered automatic disqualifiers. 

Wisconsin-based Dairy State Bank CEO Mike Bock said his organization is using sign-on bonuses to recruit in the northern region of the state and recently started Saturday shift premiums. Though he said it is “a little premature” to say the competitive hiring environment is permanent, Bock believes it will continue in the coming months.