RBS Group has axed its profit-share bonus scheme as part of a wider a government agreement over the future of pay and reward at the bank.
The existing profit-share share bonus scheme, worth 10% of salary, will not be paid for 2008 and will be axed for all future years.
However an equivalent payment will be made as part of the existing monthly award package to employees below managerial grade beginning in 2009. The average salary for this group is £18,979.
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RBS Group chairman Sir Philip Hampton said: “A fundamental reform to pay and reward is needed to reflect the reality of the situation the company is in. We fully recognise, as a company, that we have to change materially not just the business we do but also the way we do business.”
RBS Group confirmed its approach to Pay and Reward for 2008/09 as follows:
- No bonuses or pay increases will be made to staff associated with the major losses suffered in 2008.
- As previously announced board executive directors will receive no bonus for 2008 performance and no pay increase in 2009.
- Agreement has been reached with Unite in the UK for staff which they represent below managerial grades. Ongoing discussions with staff representatives are taking place in other regions. This will mean a pay freeze for directors and executives in the Group worldwide, and for most staff in the US and the Global Banking & Markets division. On average, other staff will receive below inflation pay rises.
- No discretionary cash bonuses will be paid in 2009 for performance in 2008. Only legally binding guaranteed bonuses will be paid. Total cash bonus payments for 2009 will amount to £175m. Therefore total cash spend overall will have been reduced by more than 90%.
- The existing profit share bonus scheme, worth 10% of salary, will not be paid for 2008, and will be terminated for all future years. An equivalent payment will be made as part of the existing monthly award package to staff below managerial grade, beginning in 2009. The average salary for this group is £18,979.
- Staff who are essential to the bank’s recovery and who might otherwise be at serious risk of leaving, and who remain with the bank will receive a deferred award for 2008. The deferred award will be released in three equal annual instalments beginning June 2010 and payable in sub-ordinated debt of RBS, that is, not in cash.
- In individual cases up to 100% of these deferred awards will be subject to forfeiture at the discretion of the remuneration committee and if future losses arise in relation to their 2008 activities. Awards will therefore be based on sustained long-term performance, not on short-term revenue generation.
Commenting on this Hampton said: “This approach also means that we now can offer some certainty to our employees to enable them to plan ahead financially.
“Our staff have had to contend with significant anxiety over recent weeks and months over a situation that the vast majority bore no responsibility for creating.
“We have tried, wherever possible, to focus the worst impact of the changes on our more senior staff and, in particular, those in the concentrated areas of our business responsible for the major losses recorded in 2008.”