Curbing City bonuses will ‘scare’ banking staff into moving abroad to find more lucrative work in overseas financial institutions the British Bankers’ Association (BBA) has warned.
Last week, the Royal Bank of Scotland (RBS) slashed bonuses by 90% as it bowed to government demands, stating that any bonuses paid would be kept to the “absolute legal minimum” – the bonus pot reduced from an estimated £1bn to £340m.
Chancellor Alistair Darling hoped the announcement would put pressure on other banks, including Lloyds Banking Group (as it was renamed on 19 February following the acquisition of HBOS), to cap remuneration for staff. The government wanted a “cultural change” across all banks, he said.
But forcing state-backed banks to cut awards for employees could mean key talent moves to other banking institutions which do no limit bonuses, the BBA said.
A BBA spokeswoman told Personnel Today: “Even in today’s difficult employment conditions staff still move from bank to bank. There is a possibility that, unless banks can pay the market rate, they may find it difficult to retain top-calibre staff.
“Restrictions on who companies can employ and what they can be paid may lead talent to consider relocating.”
However, Mike Emmott, policy adviser at the Chartered Institute of Personnel and Development, said City HR chiefs had a huge role in preventing employee disengagement.
“The simple disappointment of losing bonuses will not drive people out, but poor communication of the decision will,” Cotton said.
A spokeswoman for RBS said the bank had to balance political demands with shareholders and employees.
“RBS feels it has reached a position that reflects the situation the group is in and which strikes the most reasonable balance across conflicting interests of repaying the taxpayer, re-earning trust and the need to retain, motivate and attract talented people.”