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Lenders in cautious mood

Published on Friday, 07 Jan 2011

Of the many thorny issues related to the fallout from the global financial crisis, the topic of bonuses paid by the banking industry is one of the most contentious. Relative to other markets, bonuses and compensation packages paid by Hong Kong's banking industry have remained low key, but still far from immune from the public gaze and regulatory spotlight.  

Christina Ng, associate director at Robert Walters banking and financial services, says Hong Kong is unable to avoid changes to the way banks pay compensation in Europe and the United States. She says similar to Europe, there is a tendency to move towards bonuses paid based on risk and reward strategies. 

"Ultimately, pay packages are based on market forces and top performers expect to be appropriately compensated. That said, money can only keep you happy for so long and it is the working environment and people you work with that really matter," Ng says.

She says banks have adopted a creative range of strategies that include a larger salary base with smaller bonuses based on performance.

Some banks have chosen to pay deferred bonuses while others have opted to pay a fixed monthly bonus with repayment clauses written into the contract if certain terms and conditions were not met. As an alternative or addition to bonuses, some institutions offer payment for membership to private, professional organisations, mortgage loans or sponsorship for professional exams.

"Hong Kong's banking industry is going through a transition regarding compensation packages, which will take some time to smooth out. They realised the existing system was far from ideal, which has led to banks tweaking their individual systems in different ways to see which works best for them and their employees," Ng says, adding that employee movement between banks is likely to continue.

"People might see their peers move to a new employer where they receive a large increase in salary and wonder why they are not being paid the same," she says. "However, this can be a short-term view and the overall package needs to be looked at carefully." 

Eunice Ng, director at Avanza Consulting, Pacific, says bonuses should form part of the overall remuneration package, which also includes a competitive salary.

"In most cases, a responsible banking professional on a guaranteed package would seek to perform well, create value for the bank and help the bottom line. Therefore, an attractive bonus could encourage a better performance throughout the year," Ng says. "The downside of paying a high salary could mean that talent attracted to the bank will only look at the immediate return from the higher base salary and the strategy may not stimulate a great performance."

She says banks are more cautious about paying bonuses than they were prior to the financial crisis, but are still prepared to pay attractive bonuses to top performers, mainly in organisations involved with initial public offerings, investment banks, private equity firms and private banking.

Amy Ho, associate director at recruitment firm Ambition, says there are unlikely to be any bonus surprises in the mid-and- back-office banking environment.

"There is a strong feel-good factor in the Hong Kong banking field, but due to regulatory pressure and based on worldwide performance, banks are still cost-conscious about paying bonuses," she says.

Ho adds that top performers can expect to receive two to three months' bonus, and that as the industry moves closer to the bonus-payment season, most employees are likely to remain with their present employers until they have received their bonuses. She has noticed, however, willingness among employees to explore new job opportunities nonetheless.

 

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