Jakarta – The storm of layoffs that hit the world is not over, including Indonesia. According to data from the Ministry of Labor, the number of people affected by layoffs throughout 2023 reached 64,000. Meanwhile, in banking, according to data from the Infobank Research Bureau (BirI), the number of bank employees continues to decrease from 450,095 people in 2019 to 441,145 people in 2023.
Before the COVID-19 pandemic, the number of bank employees had actually decreased since 2015. The number of commercial bank employees in 2014 still amounted to 489,454 people, starting to decrease every year since 2015. During the nine years 2014-2023 there was a reduction in the employees in commercial banks by 48,309 people.
The bank that cut its staff the most during the period was Bank Danamon, which reduced its staff by 34,623 people. Bank Rakyat Indonesia (BRI), the bank with the largest number of employees, saw its staff reduced by 13,625 people.
Employee reductions also occurred in other large banks such as BTPN Bank by 7,878 people, CIMB Niaga Bank by 3,887 people, Maybank Indonesia Bank by 1,702, and PermataBank by 1,305 people.
According to Infobank Research Bureau, the decline in the number of staff in banks from 2014 to 2023 was influenced by five causes;
Firts, the end of the expansion of microcredit by commercial banks since 2008 to overcapacity when loan demand was pressured by tight liquidity and the threat of bad debts in 2014. To avoid the death trap of overhead costs and bad debts, market challengers in the mass market segment, including Bank Danamon, Bank BTPN, and Bank Mega Syariah, returned to their targeted business expertise and trimmed their micro-office networks followed by the termination of thousands of employees.
Second, employee retirement programs that occurred organically or rightsizing by banks conducting financial restructuring programs. It should be noted that several large banks had been suffering from bad debts such as Bank CIMB Niaga in 2015 and PermataBank in 2016 so that they had to restructure management, finance, and organization followed by downsizing employees.
Third, banks are competing to develop branchless banking as another way to reach customers other than branch offices, which create expensive investment and operational costs. The existence of smart agents has successfully replaced bank outlets in remote areas.
Fourth, the emergence of a new competitor, namely financial technology (fintech), which “dominated” the retail financial market made top banks immediately respond by strengthening their digital banking services so that their customers could access the bank without having to come to the branch office. The COVID-19 pandemic has accelerated digitalization in banking.
The massiveness of digital banking services has made branch offices quiet and encouraged banks to reduce the number of offices accompanied by staff reductions. The number of commercial bank office networks, which in 2014 was still 32,739 units, continues to decrease every year until it becomes 24,726 offices in 2023.
Fifth, the reduction in the number of commercial banks in line with consolidation. In 2013, the number of banks was still 120, then each year the number continued to decrease until it became 105 banks by the end of 2023. The mergers and acquisitions that have occurred in banking over the past decade have always been accompanied by a reduction in labor.
What are the labor costs at 105 commercial banks amidst the downward trend in headcount? Which banks are most eager to cut their staff? Which banks have the most productive employees? Read the full story in Infobank Magazine Number 554 June 2024!
