The cap on bankers’ bonuses is being removed as of October 31. The cap, which limited the bonuses employees of banks, building societies and investment firms could receive to a maximum of twice their basic salary, was introduced in 2014 in a bid to curb excessive risk-taking in the financial services industry in the wake of the 2008 financial crisis. The decision to remove the cap came following a four-month consultation by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority. The regulators said the move will address “unintended consequences” of the cap: salaries had been increased as a workaround. The PRA added that scrapping the bonus cap would boost the “safety and soundness” of banks, which would be able to “restructure pay faster, and the change would give firms further flexibility over their cost base to deal with downturns.” Paul Nowak, general secretary of the TUC, criticised the decision to lift the bonus cap when “City financiers are already enjoying bumper bonuses.” He said the “obscene” decision is “an insult to working people.”
Our HR comment: – Banker bonus cap to be scrapped | Consensus HR – Herts, Beds
Matthew P Chilcott, FCIPD, ACEL, Owner of Consensus HR comments: “This is an interesting news article in the majority of the press recently which seems to be supported by two major bodies within that industry but not the TUC. At Consensus HR we believe everybody should be rewarded appropriately for the work that they do with the company having a set reward Strategy and Policy. Rewards should be managed appropriately using a system that all the team can take part in and be rewarded for being successful whilst supporting the success of the business. This is why we always encourage our clients to have a set company performance review process with twice yearly performance reviews with all the team where SMART objectives are written and the team / companies success measures against these. All members of the team are rewarded for their personal input and the overall success of the company which can be financial or a reward of the employees’ choice to a set value. This process is also used for new recruits when joining the company, which after their probationary period automatically flows in the companies set process”.
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