UBS salaries rise 15-20% to make up for bonus loss
City bankers and financiers are scooping bumper pay rises to compensate for losing multimillion pound bonuses in a controversial development that will trigger fresh “reward for failure” rows.
The Observer has learnt that UBS, the stricken bank that last year received a £40bn Swiss government bailout, is paying London staff increases of between 15% and 20% at a time when many workers in Britain are forced to take wage freezes.
Though it is understood some equity traders at UBS have even enjoyed a doubling of salary to over £250,000, bank sources indicate these were “exceptional cases rather than the rule”. But senior City headhunters confirmed that basic pay rises for senior bank staff were rising sharply, with US banks seeing big hikes.
The development provoked an angry response from TUC general secretary Brendan Barber. “People at the top of these banks should not be taking rewards unavailable to most staff,” he said last night. “We have to get away from a culture that says those at the top take huge salary rises while ordinary workers lose jobs and are told to accept wage freezes.”
Big pay rises for financiers will inevitably spark concern that UK banks – most of which have been bailed out by the government – will be forced to compete on basic pay or see an exodus of their brightest talent to foreign-owned banks.
Lloyds Banking Group, which took over HBOS, is awarding staff an average of 3% this year, though some senior staff are thought to be seeing higher rises.
Bankers argue that if the culture that encouraged risk-taking to scoop huge bonuses is ending, a rise in basic pay is needed. But big salary hikes for bankers will also take the sting out of Alistair Darling’s increase in the top rate tax to 50% for those earning over £150,000, introduced in last week’s budget.
A board member of a well-known elite executive headhunting firm said: “We need to understand that people who are getting big pay increases play a critical role in making the City the pre-eminent marketplace in the world.”
Last Friday it emerged that over 70% of financial services workers got a bonus in 2008 despite the unfolding of the worst crisis for 80 years. A survey by recruitment firm Morgan McKinley revealed that 16% of respondents admitted their bonus was higher than the previous year.
At the same time there is growing pressure in Brussels to cap bankers’ bonuses and golden parachutes with tougher remuneration rules.
Angela Knight, British Bankers’ Association chief executive, said: “What’s happening is that banks are going for a new remuneration approach that removes the tendency for short-term boosts that create long-term problems.” She added that British government-controlled banks will work out their pay policies in consultation with the Financial Services Authority, with bonuses paid in shares and locked in for a long time.
Separately, there is growing anecdotal evidence that many banks, having laid off large numbers of staff in a bid to make huge savings, are now hiring temporary staff from agencies at huge cost. The problem is thought to be particularly acute at Royal Bank of Scotland.
Sunday 26 April 2009
Source: The Observer