Deferred bonuses reduce risk culture in UK financial services industry

24 October 2012
  • Vast majority of UK FS executives (89%) say that deferred bonus structure creates a less risk-prone environment 
  • More than two thirds (68%) say that employees are more motivated by remuneration than five years ago
  • Career progression most important motivator beyond remuneration for 37% of financial services employees

London, 24 October 2012– UK financial services CFOs and COOs report that newly introduced deferred bonus schemes are reducing the risk culture with the UK’s financial services sector.  According to new research by Robert Half UK, 89% of UK financial services executives believe that deferred bonus schemes reduce risk.

The change in compensation structure is in direct response to the FSA Remuneration Code that is being adopted by regulated businesses.  In many cases firms have now moved to deferred compensation and stock payments, often vesting over three year periods. While originally initiated to curtail risk-prone behaviour within the financial services industry, it has had the added impact of helping retention efforts as employees have less incentive to leave the organisation following a large bonus payment.

However the industry decides to proceed with its bonus structure, financial reward continues to be a vital motivator for executives in the financial services marketplace. Indeed, Robert Half’s research found that remuneration is even more important to FS professionals than it was five years ago: more than two thirds (68%) of executives say that their employees are more motivated by remuneration than they were in 2007.  Despite that rise, UK executives are less motivated by remuneration than some of their global counterparts such as those in Hong Kong (89%), Singapore (75%) or Germany (70%).

Beyond remuneration, UK FS executives are most likely to be motivated by change in title or career progression (37%), reduced work hours (27%), exposure to senior level projects (21%), telecommuting options/working from home (8%) and global opportunities (6%).  Outside the UK, FS executives in Singapore (26%) and Hong Kong (22%) are much more motivated by global opportunities than those in the UK.

100 Financial Services CFOs/COOs were asked, ’What impact have the changes to a deferred bonus structure had in creating a less risk-prone environment’. Their responses:

High impact

13%

Moderate impact

76%

No impact

11%

NET IMPACT

89%

 

 

100 Financial Services CFOs/COOs were asked, ’Compared to five years ago, how motivated are financial services professionals by remuneration?’ Their responses:

Much more motivated

12%

Somewhat more motivated

56%

Somewhat less motivated

29%

Much less motivated

3%

NET MOTIVATED

68%

 

 

Neil Owen, Global Practice Director, Robert Half Financial Services said: “The new deferred bonus schemes have had, without a doubt, a significant impact on the financial services industry. Our survey has uncovered encouraging signs that deferred bonuses are reducing the short-term risk culture within the sector, and is providing the added benefit of aiding companies’ retention efforts. Many employees who once went looking for new opportunities following bonus payments are now opting to remain with their employer longer-term.

 “According to our research, 68% of employees are more motivated by remuneration than five years ago. That being said, having a clear strategy around career progression, creating flexible working hours and ensuring exposure to senior level projects needs to be high on the retention agenda as well.

ENDS

Notes to editors: http://www.fsa.gov.uk/about/what/international/remuneration

About the Survey

The survey was conducted by an independent research firm and includes responses from 50 chief financial officers and 50 chief operations officers from financial services organisations in London and other major UK centres. The survey was conducted in June 2012.

About Robert Half

Robert Half is the world’s first and largest specialised recruitment consultancy and member of the S&P 500 and #1 in our industry on FORTUNE® magazine’s “World's Most Admired Companies” list (2015). Founded in 1948, the company has over 340 offices worldwide and 18 in the United Kingdom providing temporary, interim and permanent recruitment solutions for accounting and finance, financial services, technology, and administrative professionals. Robert Half offers workplace and job seeker resources at roberthalf.co.uk and twitter.com/roberthalfuk.