An analysis by recruitment specialist Poolia of year-on-year banking salaries over the past four years shows 2010 base salaries at a four year high, at the same time as the City is expecting a significant reduction in annual bonuses in 2011. During 2010, the average salary for a banking employee in the City was 17% higher than in 2009, 25% higher than in 2008, at the height of the credit crunch, and 17% higher than in 2007.
Poolia’s Andrew Bath, general manager of the company’s specialist banking team, explains that this is in part due to the fact that the market has picked up, with staffing levels growing again after the financial crisis levels, but there are other reasons.
Andrew explains, “Many banks are choosing to increase base salaries to compensate for the fact that they are reducing the bonus pool. This is especially true of middle and back office roles, where most employees can expect less generous bonuses in 2011. Partly this is due to public and political pressure, and some banks in the City have even looked to Westminster for guidance on what is an acceptable bonus level. Despite the recent flurry of media coverage, several banks have already announced that their 2011 bonus pools are likely to be down by at least 10% and possibly as much as 30%. We expect this to be the case in every City institution. But a continuing uncertain economy, with many banks profits suffering in the second half of the year, as well as economic factors such as the Sovereign Crisis, are leading banks to be cautious, and tighten the grip on costs.”
He concluded, “We think this could very possibly lead to greater movement across the City workforce, as strong candidates look to a new position to make up for the shortfall in their anticipated bonus. With continuing skills shortages in many specialist areas of banking, shortages that are likely to increase as the government moves to restrict the number of skilled migrants allowed to work in the UK, 2011 may see a heightening of the talent war. We have now moved back to a candidate-led market where employees will be strongly placed to dictate their terms. We predict that this is likely to encourage a further move to higher base salaries and smaller bonuses, as banks borrow from their bonus pool to hike up the starting package to lure the best talent, leaving the long-term future of the traditional big City bonus reduced at best, if not in the balance.”
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