When employee turnover plagued Metropolitan Savings Bank about a year and a half ago, the Cleveland-based thrift decided it was time to pay up.

Metropolitan upped its salary schedule-once, twice, and then a third time. As a result, the thrift says, the flight of employees to other banks has subsided.

"We recognized that we needed to adjust the grid," said Ruth A. Yoder, an assistant vice president. "These employees are the front line, and they should be compensated fairly."

Metropolitan Savings is far from the only community bank reexamining how it attracts and retains employees. The booming economy and tight labor market have brought on fierce competition for low- and mid-level employees; many small banks are boosting salaries, expanding incentive plans, and improving benefits.

Smaller banks also are looking beyond the paycheck for ways to attract and retain good workers. Some are experimenting with flexible work hours, and some are more publicly rewarding individual achievement.

But most community banks are finding that money speaks the loudest. As a result, pay scales are rising markedly.

The average compensation-salary plus bonus-of a teller at a bank with $250 million to $499 million of assets has climbed 28% in 10 years, to $15,500, according to an annual compensation survey conducted by the Bank Administration Institute in Chicago.

The same survey found that the compensation of bookkeeping machine operators at community banks has risen 34% in 10 years, to $18,600.

Jon A. Doukas, a human resources consultant at Professional Bank Services Inc. of Louisville, Ky., said community banks have had to offer better base salaries to compete with other industries.

"If fast food is paying $7 an hour, why would someone work for a bank with its pressures for $6 an hour?" Mr. Doukas said. "You have to pay whatever it takes to get the professionals you need."

Entry-level community bank jobs, once lower-paying than similar jobs in other industries, have rapidly caught up. Last year, a billing clerk's median annual salary was $19,056, while a secretary earned $19,488 and a general sales counter clerk earned $14,544, according to the Bureau of Labor Statistics.

Bankers say higher salaries translate into employee loyalty and less turnover. At First National Bank of Southwestern Ohio in Hamilton, fewer employees are leaving to work at local doctors' offices and insurance agencies.

"If a teller is friendly and accurate, she can take those skills anywhere," said Brian Moriarty, senior vice president at First National. "You have to pay them more. If you're a single parent, 50 cents an hour extra makes a big difference."

Despite the upward trend, some compensation experts say banks still aren't paying enough. Alex Sheshunoff, president of Alex Sheshunoff Management Services Inc. of Austin, Tex., said banks are "grossly underpaying" front-line employees, the people directly responsible for building customer relationships.

Instead of earning $30,000 to$40,000, Mr. Sheshunoff said, these employees should be paid $50,000 to$80,000 a year, with part of their compensation tied to performance.

Not even the nation's biggest banks are meeting Mr. Sheshunoff's goals. For instance, branch managers at banks with more than $1 billion of assets earn $39,000, according to the BAI survey, just slightly more than branch managers at community banks.

The BAI study also found that more bank workers-not just senior executives-are receiving bonuses based on job performance. Last year only 40% of community bank tellers polled by BAI received annual bonuses; in this year's survey (which is based on the total compensation banks project paying employees in 1997), 50% will receive them.

Some consultants advocate bonuses for everyone, saying they are great motivators.

"When you tie incentives to total compensation, people start paying attention," Mr. Doukas said.

Several de novo banks have taken this approach. Brian Brown, president and founder of two-month-old Community Savings Bank in Robbins, Iowa, said the potential to earn a high bonus makes employees feel-and act-like owners of the bank.

Mr. Brown said his workers take relationships with customers very seriously, and are more apt to pinch-hit where they're needed, like at a drive-through teller window at rush hour.

Most bonuses are paid in cash, but some banks use employee stock ownership plans to reward employees and ease fears about acquisitions.

Anthony S. Abbate, president and CEO of Interchange State Bank in Saddle Brook, N.J., said his bank's employee stock option program promotes loyalty. Each Interchange employee gets 1% of his or her annual salary in stock.

Employees each receive quarterly and annual reports, Mr. Abbate said, making all of them feel like they are shaping the company.

Some Interchange employees get additional perks. Top performers win outings to New York City, and workers who perform well in teams or excel at customer service win other awards.

"We jump through extra hoops to honor our heroes," Mr. Abbate said.

Noncash benefits are becoming a big drawing card at many banks. Holland, Mich.'s AmeriBank offers full medical benefits and tuition reimbursement plans to part-time employees as a way to attract qualified workers from other industries.

"The benefits are our ace-in-the-whole," said Barbara Huls, vice president for human resources. "Our wages are competitive, but you have to have that extra oomph."

More and more banks are trying to promote loyalty and retain strong performers by showing sympathy toward their personal conflicts. Metropolitan Savings Bank in Cleveland has begun offering "flex time" for some employees who find family commitments and other conflicts make it difficult to work a bank's 9 to 5 hours.

Ms. Yoder said she recently retained one employee who was ready to quit because traffic jams were making her commute unbearable. By allowing the woman to work 10 a.m. to 6 p.m., the employee missed the traffic jams and kept her job at the bank, Ms. Yoder said.

Others try to retain employees by showing them they have a future at the bank. Citizens Bancshares, in Salineville, Ohio, posts internal job listings for employees throughout the holding company so they may find opportunities to advance, said chief executive officer Marty E. Adams.

While banks are going the extra mile to compensate employees in new, innovative ways, several experts warned that not everyone will welcome the changes.

William Carden of Carden Group in Waco, Tex., suggests banks take three years to implement incentive-based compensation because the system will be bumpy in the beginning.

"The first year is hell," he said. "But you re-adjust and everyone calms down."

Mr. Doukas agreed.

"I tell all of my clients to be prepared," he said. "People are learning, and there will be a lot of questions."

Other community banks, such as Tri Counties Bank in Chico, Calif., found that under their sales-based compensation system, employees were selling more, but not the necessarily the products most profitable for the bank. The bank is revising its system.

Richard White, president and CEO of Community National Bank in Derby, Vt., said his tiny bank abandoned its incentive compensation plan because employees favored straight salaries.

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