How Cutting City Jobs Equals Bumper Bonuses
The financial crisis in 2008 brought a common phrase into the country’s vocabulary: bankers’ bonuses. The phrase encapsulated everything that was to blame for the economic situation, as the people responsible for the terrible financial mess the country found itself in were continuing to get rewarded for their risky behaviour. Meanwhile everyone outside of the City was forced to put up with cuts to public services, a freeze on salaries or perhaps even being made redundant.
Whenever bonuses for top executives were announced there would be an uproar, and politicians would perform a careful balancing act, wanting to be seen on the side of the public without calling for bonuses to be banned outright (perhaps primarily because doing so would have shown just how impotent they were in this matter).
The unfairness of bankers’ bonuses
It was inevitable that bankers’ bonuses were to become synonymous with unfairness as people looked for someone to blame. At a time when everyone was supposed to be in it together, those that still got their bumper bonuses – the ones that are commonly thought to be the reason people were in ‘it’ to begin with – seemed to be better off than before. Since we associate bankers’ bonuses with the unfair, it shouldn’t come as any surprise that the latest scandal surrounding bonuses concerns how HR managers in the City are being given huge financial rewards at a time when they are cutting thousands of jobs.
Demising and right-sizing
Many have criticised not only the fact that such cuts are being made, but the way in which they’re being made. Rather than being forthright about making redundancies, many of the biggest and most prominent banks have used ridiculous euphemisms that will only have added insult to those that are facing the job cuts. In April 2013 HSBC announced in a press release that they were ‘demising the roles of 942 relationship managers’. This would account for less than a third of total redundancies – or demises as the bank might prefer to call it.
Meanwhile, in February those in charge at Barclays chose to talk about how cutting 3,700 jobs was a way of ‘right-sizing’ their business. Of course, most people would simply call it down-sizing, but then maybe the bank thought the negative connotations of ‘down’ might have had an adverse impact on investors. Whatever the reasoning, the thousands of employees that lost their jobs are unlikely to have taken any comfort from the fact that bank bosses tried to put a positive spin on such a devastating day for them.
History repeating itself
Anybody that has followed the fortunes of the City will not be surprised to find out that HR managers are handsomely rewarded for their part in making thousands of people redundant, as the bonuses they receive on top of their generous salaries are nothing new. Even in 2011 the average bonus for the HR professional reached 18 per cent of their salary, which amounted to just under £10,000. Ironically, the UK director at international HR recruitment specialist Ortus, Stephen Menko, suggested that it was the banks’ need to hire more staff after the recession that was the driving factor in HR staff being awarded their bloated bonuses.
Bonus culture coming to an end?
Those people concerned that the bonus culture in the City is having a detrimental effect on the nation’s fortunes can at least rest easy knowing that the amount spent on bonuses has been steadily falling since 2009/2010. While more than £7.3 billion was spent in that year on bonuses, this number fell to £6.7 billion the following year and then again to £4.4 billion for 2011/2012. Meanwhile the Centre for Economics and Business Research forecast that bonuses for 2012/2013 wouldn’t amount to more than £2.3 billion. Some in the banking sector have been quick to suggest that the fall in bonuses is not good news for the nation, as these bonuses are heavily taxed and the treasury will be losing out. However, it’s clear that for many people a change in culture is needed, and the loss of funds for public services may be a price worth paying.
Indeed, the news last December that more than half of the financial professionals working in the City expected to receive a bonus that matched the previous year shows that bonuses are still perhaps taken for granted at a time when people working in other sectors may be grateful for simply keeping their jobs. It seems that if the bonus culture is coming to an end, there is still some way to go.