City juniors get big pay rises as bonuses are cut

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The Independent Online

Huge salary rises at banks have filtered down to middle and junior level staff, leaving even the average "vice-president" – a catch-all title for mid-ranking employees – on close to six-figure salaries, according to City headhunters.

The City recruitment firm Astbury Marsden said the average base salaries for City workers at vice-president level had increased by a fifth over the past year, from £81,250 to £97,500.

Even relatively junior assistant vice-presidents have enjoyed huge pay rises, with their salaries going up by an average of 12 per cent, from £62,945 to £70,480, over the past year.

Earlier this month, it emerged that HSBC was planning to double the basic pay of its senior investment bankers, while reducing their bonus payments by a similar amount.

The move by the bank follows pressure from regulators, who believe the City's bonus culture encourages cavalier risk-taking among bankers, and mounting public outrage after an estimated £1trillion in state funds was spent to prop up the sector during the financial crisis. Most of the other Leading investment banks have already taken similar steps to realign their pay policies.

In addition to cutting bonuses, they have been forced to pay a high proportion in shares, and make them subject to claw-back – allowing the bank to reclaim money if bankers' decisions are later found to hurt employers.

But while top City money-makers have always made huge sums, Astbury Martin's figures suggest that the salary surge is being reflected at all levels of investment banks, and among people who have not typically been used to huge sums in bonus payments.

It comes at a time of pay restraint and even pay freezes among many workers, including nearly all of those in the public sector as a result of the Government's austerity plans, and in many parts of the private sector as employers grapple with the economic uncertainties that continue to afflict the British economy.

Jonathan Nicholson, the managing director of Astbury Marsden, said: "The fixed part of a remuneration package is becoming far more important, and the salary rises you are seeing at the top are very much permeating down through the organisation.

"Among even the top rain-makers you are seeing that as much as two-thirds of compensation is now fixed. Many of the people who have had these rises may be in for an unpleasant surprise though, because they may not have realised the rises come at the expense of bonuses."

But Mr Nicholson said there was sting in the tail of the pay rises: the end of the mega-bonus means that banks have less leeway to lower costs by cutting bonuses. Instead, they are likely to make job cuts when times get hard, meaning that those enjoying the salary rises are going to find their employment is far less secure.

"Banks are now far less able to manage their cost to income ratio than they were. To do it, they will now have to fire people and what it means is that the people in the back office, in IT and other support functions who hold banks together, will get cut," Mr Nicholson added. "That is because banks will do everything they can to retain their top money-makers and those people are cost centres. They can't be seen in any other way."

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