This is from yesterday’s Telegraph.  Marvellous.  Bad news for employment lawyers, of course.

No related posts.

The FT is reporting today that the FSA has finally produced its remuneration code on how bankers should be paid.  I have only seen the headlines and brief summary of the proposals, but it seems that the FSA has shied away from being too prescriptive for fear of driving bankers abroad to less tightly regulated markets.  Expect a deluge of criticism to fall on top of the FSA, whose days are numbered if the Tories return to power at the next election.

The draft code stipulated that two-thirds of each bonus should be deferred and that individuals should be rewarded on the basis of the firm overall rather than just the individual or the business unit.  Apparently that isn’ t in the code to be published today. I posted last week on bonuses and clawbacks – click here to read it.

Undoubtedly the FSA will be criticised for not taking a more rigorous line, yet it is in a situation where it is damned if it does and damned if it doesn’t.  If they had produced a very stringent code the institutions would accuse the FSA of destroying London’s competitiveness as an international financial centre.  Other international regulators are not taking a hard line so why should the FSA?  In my view it would be a bad move to have a government body dictating pay – like the failed prices and incomes policies of the 1970s – and ask yourself this: if the state starts dictating what bankers can be paid, who will be next up for regulation?

Related posts:

1. Bonus – what bonus?

I normally expect to get a lot of enquiries about low or non-payment of bonuses around this time of year.  However, it is not normal for the subject of bankers’ bonuses to be front page news or for all three party leaders to jump on the bandwagon and criticise the level of bonus payments.  Of course, we’re not living in normal times at the moment and bankers are going to be fair game for the media and politicians.

What is noticeable about the current debate is the lack of clarity.  Are we talking about all bonuses (such as the fairly small sum that a cashier on a frontdesk in Barclays would expect to receive – cf: John Varley CEO of Barclays on BBC News last night) or the stonking seven or eight figure sums going to the Masters of the Universe?    What about the high five or low six figure sums going to those in between?   Also, are we talking about discretionary or guaranteed bonuses?  Or commisssion payments?  As usual the media seems to let us down.

Here is my take on the situation.  If you’re working for an Investment Bank and sitting at your PC wondering if you’ll get a bonus (or smarting over having been told you won’t), these are the issues. 

1.    If the bonus you were expecting was wholly discretionary and you’ve got a low or nil bonus it is going to be difficult (but not necessarily impossible) to successfully challenge the award made to you.  The precise terms of the bonus scheme will need to be looked at.  Do you have to be in work at the date it is paid (have you been made redundant conveniently early so that you’re not around when the payment is made)?  Is there a payment in lieu of notice clause in your contract?

2.  Is it a commission payment?  In other words, have you a contractual entitlement to be paid, say 10% of the value of the work you bill?  If the employer doesn’t pay this they will need to have a pretty good reason because, provided you have met the conditions, you should be entitled.  In reality this sort of scheme isn’t seen very often in the City and is not the target of the jibes made by all and sundry in the media. 

3.  Have you got a guaranteed bonus?  These are seen most commonly when an employee joins a Bank, perhaps to compensate them for losing stock entitlements at their last job.  Usually the schemes will require the employee to be in employment as at the payment date and not to be under notice or in the midst of disciplinary proceedings.   The sums guaranteed can be substantial and it is these types of payment that will be giving the banks the biggest headaches.  The employee will be entitled to receive the payment and I  foresee much litigation occurring if payment isn’t made, especially if the employee has performed well.  In cases where someone expecting a guaranteed bonus hasn’t performed well, or has lost their employer large sums of money, they may well find themselves facing a counter-claim for breach of contract for not performing. 

My firm has a lot of experience in acting for banking executives in relation to all these issues.  If you are in doubt about your situation do take legal advice quickly.  You can reach me on 0207 464 8433 or at michaelscutt@dalelangley.co.uk

Related posts:

1. Bonus Rage and Clawbacks
2. FSA Remuneration Code for Bankers

I’ve been writing quite a lot recently on employees’ rights when selected for redundancy  and have covered most of the main issues on rights, selection criteria and compensation.  I thought it might be helpful to set out, on a no names basis of course, the general trends I am seeing from the clients from financial services companies coming in to the office.

1. Consultation – often  ignored.  If more than 20 people are placed at risk in one “establishment”, basically one office (although the law is not entirely clear on this point), within a 90 day period (or 100 people in a 90 day period)  then the employer must consult with the affected staff for at least one (three) months.  Some employers are not doing this or are paying one month’s salary as compensation for the failure to consult. 

2. Selection criteria – often not disclosed. Many people I am seeing have little or no idea why they have been selected and HR often won’t disclose what an individual’s score against the selection criteria is, let alone how that person scored against his/her comparators. 

3.  Compensation packages – not always as generous as in the past.  General custom and practice in the City in the past has been to pay one month per year of service by way of enhancement.  This is still happening, but is not of universal application.  We are seeing two weeks per year in some cases and, in smaller businesses, just the basic statutory entitlement (notice money plus a statutory redundancy payment of £330 p.w p.a of service). 

4. Bonuses – very few people have pro-rated bonus clauses in their contracts of employment.  In most cases employees will be on discretionary bonus schemes which stipulate that that person is in employment (and not under notice) when the bonus is paid, which is often in February/March.  Anyone whose employment is due to terminate before the bonus season commences is going to have difficulties in arguing for a payment in respect of bonus. The law is not at all supportive of employees seeking to challenge a low or non-existent bonus.  Many of the employees I am seeing at the moment seem very surprised at learning this and seem to think that they should be paid a bonus whatever – despite the fact that the banking world, not to mention the rest of the economy, is in meltdown.  It’s time to wake up to the new reality guys.

5. Options/Restricted stock Units -  Much depends on the terms of the Scheme rules.  Some schemes allow a window of time for the stock or options to be traded following termination.  In many cases the options are well under water and currently valueless. 

6.       HR/Employers’ Lawyers – quite often they are taking a very hard line on the packages offered and are refusing to negotiate, unless there is evidence of unfairness.  I have seen a number of people recently where redundancy has been cited as the reason for terminating employment but, in reality, the real reason is often different – and probably unfair.  The current climate makes it easier for employers to get rid of those employees they see as being difficult or aren’t seen as being up to standard.

It’s not possible to generalise all the time though, but we are certainly seeing more people with “issues” on redundancy at the moment than we did back in 2002/2003 the last time there were mass redundancies.  Please also remember that if you do have “issues” with your selection or the package offered the legal fees offered by the employer will probably not be sufficient to cover a solicitor to argue the case fully for you - legal fees on offer seem to be around £400 – 500 inc/exc VAT.  That is enough to give advice on the terms of the agreement and your general rights but is not sufficient to cover negotiating a better package or challenging the reason behind the termination of your employment.

Please give me a call on 0207 464 8433 or email me at michaelscutt@dalelangley.co.uk for more advice.

Related posts:

1. Redundancy or Pay Cut?
2. 10 questions to ask if you’re made redundant
3. Consultation on Redundancy