The City of London cheered last week when the bonus cap was scrapped...almost a decade after it was first ushered in during a wave of post-financial crisis remorse.
Today, post-Brexit, the UK government is more rapacious and eager to attract business to its shores. But are banks really champing at the bit to slash fixed salaries in favour of eye-watering bonuses?
Industry experts are sceptical. Firstly, a fixed salary doesn’t look like such a bad deal during times of economic uncertainty and layoffs. Plus, banks themselves are mindful of wading into a minefield of risk.
Fixed salaries have increased over the years to compensate for the bonus cap. “If you remove this cap, there’s not much expectation that banks will suddenly reverse the base pay to pay more via discretionary compensation,” says Ian King, a former risk manager who coaches executives.
“You could only do that if you culled the fixed rate,” he says, calling it a policy nightmare for risk officers and remuneration decision-makers that would be “very difficult” to enact.
Cutting salaries and hiring cheaper staff could trigger constructive dismissal claims too.
Mardi MacGregor, partner in Fox Williams’s financial services team, says: “This is a headline rather than something that will make a difference. The banks we speak to aren’t trying to down-negotiate salaries.”
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