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Will we see the end of bonus culture?

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John Newton

Will we see the end of bonus culture in 2020?

 

In financial services, the bonus culture is part of the deal. Often, the bonus is predicated on both the employee’s performance and the company’s performance as a whole. Set out clearly as part of the employment package, the bonus is there to incentivise the employee to meet their goals or targets, and to ensure that they are contributing to the financial performance of the company during the year.

This year, of course, has been – and will continue to be – exceptional. Firms that might have expected growth in 2020 have suffered financially because of the pandemic and may not have reached their own performance targets, or indeed have the cash available to pay bonuses.

In-house and external lawyers will be considering whether those people on furlough, and not allowed to work for the business in any capacity, are entitled to a bonus payment under the terms of their contract.

Even those businesses that have continued to operate at a good level during the year will be planning ahead, with plans in place should there be a second spike, or further restrictions, that interrupts business again. This might include putting cash aside to give a financial cushion if needed, and that again may impact on the payment of bonuses.

 

The impact on bonuses

 
Europe
  • 5% say bonuses will increase
  • 38% say bonuses will stay the same
  • 57% say bonuses will decrease
 
USA
  • 6% say bonuses will increase
  • 38% say bonuses will stay the same
  • 56% say bonuses will decrease
 

Bonuses vs. other benefits

 

Data from our recent salary guides indicate that, for most in the sector, bonuses are a small part of the overall benefits package. Although across Europe and the USA, bonuses can range from 5%-40% of salary, depending on the role, sector and firm.

In Europe, more than half of the organisations we spoke to predicted a fall in bonus payments compared with 2019, with less than 40% saying that bonuses would remain the same. Figures are almost identical in the USA, where some may argue that bonus culture is more important than in Europe. This serves to show the severe impact that the pandemic has had on the sector on both sides of the Atlantic.

In essence, this means that firms will now look at the broader financial package on offer when recruiting. As we have said in our Salary Guides for both Europe and the USA, issues like flexible working are becoming key expectations for candidates, and whilst bonuses are still attractive, the best candidates are looking for higher base salaries and potentially other long-term compensation such as stock programmes (where relevant).

A balanced, attractive financial package along with a supportive culture is expected to be most attractive to senior candidates as we move forward.

 

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