It’s that time of year. It’s important that business gets off to a steady start but there are also all those appraisals to write and remuneration to negotiate. It is never an easy process but, from what we are hearing, it could be more fraught this year.
First, there’s performance: 2009 was a good year and prompted ambitious targets for 2010. The word regarding FX trading and sales is that, while some houses are letting it be known that 2010 was great, a fair few, a sizeable majority even, have undershot by 25% or so. That is not conducive to a bumper payout.
Second, the tendency to keep hedges simple – where pricing is most transparent and spreads are narrowest – will continue to subdue sales margins.
Third, there’s a tendency to steepen the bonus curve: performers get paid well, non-performers get zilch. Not only that but sources reckon the remuneration committees will focus on total compensation: if the basic salary has gone up by anything appreciable, underperformance will hit the year’s bonus even harder.
Fourth, there’s the regulatory regime and the changed structure of pay packages. Basic pay may be up but bonuses are partly deferred, partly paid in subordinated stock and taxed (for those fortunate enough) at 50%. One well-placed source said: “the FSA remuneration code is not yet absolutely final but it looks as if at least 50% is going to be in stock. For earners over £500k it will be 60%. I would also then not assume that the residual 50% will be cash up front either – more likely it will be 50% of that 50%.” The money paid into the bank account is often going to look disappointing compared with previous years.
The last point also means that the cost of the make-whole to new hires will be a lot higher this year than last but there are a few names out there aggressively recruiting to play catch-up or revitalize the business. There should be a good number of traders out there for whom a new start with an attractive guarantee will be appealing.
It should be a good few months for the people moves column.
