CBN and wicked banks’ outsourcing of staff -By Chris Enyinnaya

Developments in the banking industry with respect to labour practices suggest that banks are abusing Nigerian labour law through a scheme of staff outsourcing.

A case in point relate to Mrs. Dorothy Anya Igwe (real names) outsourced to a bank branch located at Alaba, in Ojo Local Government Council of Lagos State. The lady while on official duty took ill and got official permission from the outsourcing company VLA (real name) to visit the approved hospital. She was asked to get a medical report of fitness from the approved hospital and tender same on resumption of duty which she did.

To her surprise, her salary was stopped from April to September 2014. She complained orally and in writing but nothing was done until she sent a reminder whereupon she got a bigger surprise. Her employment was summarily terminated.

She approached this writer for assistance in the matter. A phone call to a high-ranking officer of the bank (names withheld) was all it took for her appointment to be re-instated. On resumption, nothing was done about her four months unpaid salary.

After working for another two months, she complained again about her unpaid salary only for her appointment to be finally terminated by VLA. The VLA said the bank did not remit her four months’ salary. Having regard that her earlier reinstatement which was at the intervention of the bank, she got a lawyer to verify the claim from the bank. Surprisingly, the bank replied that they do not know her or her lawyer and have no business with them. They only have business with VLA, the outsourcing company.

What a clever way to beat Nigeria Labour Law. Is it not trite law that he who does a thing through another does it himself? Banks in Nigeria are contravening the labour law and getting away with it This hazy nature of this matter is because it is not clear whether the Central Bank Of Nigeria (CBN) issued any guidelines on outsourcing of bank staff by deposit money banks.

This regulatory lapse is contrary to the practice in developed economies Nigerian banks are copying. According to Ryan Tracey in an update of December 5 2013 which the writer accessed from the internet, the Federal Reserve Bank of New York issued guidelines to state banks and bank holding companies. Among other things, the Federal Reserve Bank said that banks must be wary of outsourcing risks. It reminded them that bank managers and directors are responsible for the activities of contractors (outsourcing companies) they hire. It noted that banks face “reputational risks” if a contractor’s error mars the bank’s name, in addition to legal risks faced if contractors do not follow the law.

The Federal Reserve Bank warned finally that if not well managed effectively, the use of service providers may expose financial institutions to risks than can result in regulatory action, financial loss, litigation, and loss of reputation.

Like we said earlier, banks have used staff outsourcing to contravene Nigerian labour law. Furthermore, staff outsourcing has become a source of corruption through brazen breach of corporate governance. Most of the outsourcing companies in banks are owned by wives, brothers, sisters, sons, daughters, cousins, girlfriends, concubines or other cronies of bank directors and shareholders without statutory disclosure. Jumbo pay and allowances are paid to outsourcing companies per head of outsourced staff or contract staff. What this category of staff gets as salary is peanut. Imagine a bank outsourcing company like VLA paying a marketing staff N43,000 (forty three thousand Naira per month), no leave allowance, no contributory pension scheme, no lunch allowance, no leave allowance , no bonuses and no annual increments for the past three years whereas banks pay them up to N150,000 (one hundred and fifty thousand Naira) per outsourced staff per month.

Nigerian banks have no rational economic reason to be outsourcing staff. Staff outsourcing is a strategy adopted by companies in distress, especially manufacturing companies, to cut staff cost and rationalize departments and operations to enable them focus on their core business of manufacturing.

In the case of Nigerian banks, they are declaring billions of Naira year in year out as profit. It is on record that no Nigerian bank has declared loss in the past five years. Why don’t the banks engage full-time staff, pay them well, and ease unemployment in the country?

Outsourcing practice was introduced to the banking industry by the so called new generation banks in early 1990s without proper study because their largely inexperienced management staff did not fully understand the intricate nature of banking business. They failed to understand that they were being Kobo wise Naira foolish. The money they supposedly save in staff emoluments through staff outsourcing is lost ten times over through bank fraud by outsourced staffs that have no reason to be loyal to the banks. In fact most of the outsourced or contract staff are disgruntled when they compare the salary disparity and conditions of employment of permanent staff working with them in the same environment.

The CBN should investigate the alleged labour abuses by licensed banks through staff outsourcing and call them to order. Most bank staff like secretaries, security operatives, cooks, stewards, bank vehicle drivers especially bullion van drivers are all outsourced staff. Worst still bank tellers who handle raw cash on daily basis in Operations Department of Banks are mainly OND and HND certificate holders who are outsourced as contract staff. This is a very dangerous practice because over 80% of bank frauds occur in Operations Department where disgruntled and unmotivated staff are dumped.

To effectively tackle bank fraud, outsourcing of bank staff should be discouraged in Operations Department of banks if not in all departments. .This is because every employee of a bank in the course of work is in possession of sensitive information that has money value. Such sensitive information can be leaked to fraudsters or even armed robbers that can attack banks at the right time and place.

Finally, staff outsourcing acts as a disincentive to banks to train, retrain and training and develop their staff. The managerial skills gap in the banking industry is due to staff outsourcing which ensures that stability of tenure of bank staff in their position is not guaranteed. The sooner banks do away with staff outsourcing policy the better because it is an ill wind that blows no body no good.