FCA to no longer pay discretionary bonus to employees
The UK Financial Conduct Authority (FCA) is planning changes to its pay structure, as outlined in a letter signed by Nikhil Rathi, Chief Executive of the regulator. The letter, made public on October 7, 2021, makes it clear that the FCA plans to remove the discretionary bonus for its employees.
The discretionary bonus has been in the form of an annual one-off cash payment. It has been available to all, including to the most senior FCA employees.
Nikhil Rathi says:
“We are concerned, however, that such one-off rewards have not been effective at driving consistent individual or collective performance, particularly when so many objectives and outcomes have multi-year time horizons.
Furthermore, the payment of significant cash bonuses risks undermining confidence in the FCA. The bonus does not include some key elements that we ask of those firms we regulate, for instance clawback or deferred payment mechanisms for senior colleagues”.
The FCA CEO also notes that it has become increasingly difficult to justify these one-off payments following the publication of two independent reviews, which found that the FCA acted too slowly and with insufficient creativity and assertiveness to prevent harm to consumers. This is particularly so when bonuses are paid to the vast majority of staff and not just those who have performed exceptionally.
As a result, the FCA is proposing that the discretionary bonus, from next financial year, will no longer be available.
The FCA CEO presents a new offer, which focuses on improving base pay for those who meet their objectives and are in lower pay brackets or paid below or at the lower end of the pay ranges.
The regulator is proposing new, simplified salary ranges. These will be reviewed annually so they remain in line with the market.
For the first time, the FCA is also proposing different pay ranges for those based outside London to reflect geographically diverse labour markets. This move would bring the FCA in line with many other employers. The FCA aims to reconfirm its commitment to its Edinburgh office, with a planned doubling of roles, looks to set up an office in Leeds, as well as establishing a presence in Cardiff and Belfast, reflecting its commitment as a national regulator for all of the UK.
Further, the FCA proposes bringing all those who perform strongly, clearly meeting or exceeding their objectives (i.e. rated 3, 4 or 5 in the FCA new performance grading system) this year within new pay scales if they are currently paid less than the minimum of the new ranges.
In addition, those clearly meeting or exceeding their objectives (i.e. rated 3, 4 or 5), will receive a proposed 2% increase in base pay from April 2022 and a similar 2% base salary increase is also proposed to be available from April 2023, provided performance is maintained.
For employees below Manager/Technical Specialist level who perform strongly, clearly meeting or exceeding their objectives (i.e. rated 3, 4 or 5 in our new performance grading system) this year, the FCA also proposes to backdate the 2% pay increase to April 2021, and pay it as an equivalent, one-off cash payment in April 2022.
Put together, the FCA proposals mean an employee in the Supervision Hub currently on £25,000 a year, who consistently meets their objectives, will receive a 26% increase in base pay over three years.