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Decouuur 14, 1946



^clos, Chairman
. .. - on of the
^cierul ftesorve System
t, >* C
AT Crovornor 3:icolos:

As you \fere advised hy Chair roan Parten in h i s t .
nation with you l a s t Thursday, the Board of Directors of this bank, a t i t s
, on December 12, 1946, acting upon the reooazaandation of i t s Cofflmittee on Personnel, approved an adjustment in the salaries of a l l employe
of the bank and i t i
• officer level to conpensate for tho
incroasQ •which 1ms occurred in the cost of l i v i
oo April 15, this year.
That decision was reached after thorough coneideratlon of tho problem by
tho officers of this " - ,
jiiittoe on Personnel of the Board of Directors, and the antiro Boai •
oral factors were taken. iJito consider: .
on Personnel in i t s r
\» rs« ,>oi.i tho
•1 of 1941 to date, salary acijustiaents aiaoujr1
tte to approximately 23 per oent of annual baso salary havo be
.iiis ba «
aludod the
1. in, into base salary on January
1, 1946 of the supplemental compensation authorized in tho fall of 1941 and
amount i n ; to 10 per oent of the first 1,800 of annual salary and 6 por cent
of tho noxt Si, 200 of annual salary (aver
appro .
ly 8 per cent of
employees1 base salaries), and the flat increase of 15 par cent of base salary made as t
1, 1946, roflectod, at loast to aaam oxfcont, the Increase
in the cost of l i v i
Ich had occurred during that entire period. Since
x'il 15, or approximately the date of the last ^enoral salary adjustment
do by this bank, our estimates indicate that the cost of living has increased by approximate]
per cent.
Our CoiiffiiittoQ on Personnel and our Board of Directors also ga
ral v/a^o situ
as i t prevails currently in the
labor market* Recognition was ^;iven to the fact n
ie cost of
living lias increased durl
sereral montlia but als<
demands will almost c
r •.
rously in various sectors
of the labor market durin
It was not boliuved that
ild disassociate itself completely fron tiie influence of the events
ich are taking place in the general labor raarket in which i t nust consider
itself competitivo. In lino with that then lit, consi
Lou w^s given to
. fact that numerous ot
orkars in
i s area either iiavo iiaao or are contemplati:
I ] ry adjustments in one
form, or a
. In some instanoos, those i

of increases in base salary. In other Iiastaxices they have boon m d e in a
luuip sum payment, while in other oases a policy of making a sories of
temporary monthly adjustments has been followed*
In view ox the above, therefore^ consideration was given to three
linos of approach* The first of these and the one preferred by our Board
would involve the payment of a single lunp sum to each employee* The second
would involve a monthly adjustment for a predetermined period of tino, and
the third would involve an adjustment in base salaries• It was recognized
that each of those approaches possessed oertain advantagea and disadvantage8«
After thorough consideration the Board of Directors of this bank
approved the payment of a iunp sum oost-of~llving salary adjustment according
to the following plan, provided that appropriate reimbursement could be obtained for the payments made to those employees whose salaries are recoverable
in whole or in part from the Treasury and other Governmental agenoieat
The payment of a lump sum equal to 8-l/3 por cent of
annual base salary ao of December 51* 1946 to all employees
having one or nore years of service as of that date* to
all employees having lese than one year of service as of
December 51, 1946, the payment of a lump sua equal to 8-1/3
per cent of the base salary received by each such employee
during the calendar year 1946• Payment of such a lump sum
amount to be made as of January Z9 1947 in order to.disassociate the purpose of the payment from the concept underlying Christinas bonuses and to give to the employees any
benefit which nil;ht result 'from possible income tax reductions during1947 • This percentage adjustment, equal to
one month1s salary and payable in a lump sum* is the amount
and type of adjustment being announced by many other large
competitive employers in this area* The aggregate cost of
the salary adjustment under this plan would approximate
,,-100,000, of which approximately S ; por cent 'would bo re'i
imbursable from Governmental agencies*
In the event that reimbursement could not,bo obtained from the
Treasury and other Governmental agencies for lump sum payments made to adjust the salaries of Fiscal Agency and other employees whose salaries are
reimbursable in whole or in purt, then 'the following plan union provides for
the adjustment to be paid over a period of months was approved as an alternative. It was assumed that under this plan no question would arise with rogard
t o r ainhur s ement•
A' series of six equal monthly payments beginning in
January, 1947 and extending through June, li)47, amount 1 .
in the aggregate to 8 per cent of annual base salary as of
December SI, 1946, to all employees having one or more yoaro
of service as of Decexribor 31, 1346, To all employees havi
less than one yoar of service ao of December 51, 1946, the
payment of six equal monthly suns beginning with the month
of January, 1947 and extending through June, 1947, amounting

„ r


in the aggregate to 8 per cent of the base salary received
by each employee during the calendar yoar 1946. The Aggregate cost under this plan would approximate; 1184*000* of
which approximately 35 per cent would be reimbursable from
.lovernmontal agencies •
Considerable discussion was given to the desirability of an adjustment in base salaries. Our most recent survey of the salary situation
in our labor market indicates that at the present time, with the exception
of sqma of our higher salaried positions for ivhich our compensation appears
to be below the market, our basic salary structure, generally spoakinrj, teens
to be approximately in Tine with the. basic salary structure in the market.
It should be noted, however, that that statement refers to basic salary relationships only and does not ^ive consideration to the supplementary costof-living adjustments and bonuses which a number of employers in this area
are making or contemplating, and whioh have the effect of raising the level
of the salary structures with whioh this bank is competitive. Moreover* the
possibility was recognized that a temporary adjustment mi,;ht, through the
force of circumstances, ultimately become an adjustment in basic salaries*
Whether that event will occur would appear to dopond upon the course of
salary developments in the labor market during the months ahead. If a high
or increasing • - a e rate structure is to prevail in the period ahoad, it is
probably only being realistic to recognise that this ban,:fs salary structure
will be influenced in the same general direction as the salary structure of
the general labor market.
Our Board of Directors fools strongly that an adjustment of salaries should be made at this time. Therefore, wo shall appreciate it very
much if the Board of Governors will give prompt consideration to this natter
and advise us as promptly as .possible' of its reaction.

Ifith kindest personal regards, I
Sincerely yours