HSBC is set to phase out fixed-pay allowances for senior employees, increasing the share of remuneration delivered through bonuses.
The bank will start dismantling the existing arrangement at the beginning of 2028.
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The revised system is designed to tie a larger share of compensation to performance and is part of CEO Georges Elhedery’s changes at the lender, reported Bloomberg.
The decision follows Barclays’s announcement in July that it would allocate more of its employees’ compensation to bonuses.
In a statement, an HSBC spokesman said: “As a global bank, adapting our approach in this way strengthens our ability to pay for performance, better differentiate, attract the best talent, and recognise those who deliver the best outcomes for our customers, clients and stakeholders.”
Fixed-pay allowances were introduced at major British banks more than a decade ago.
According to The Straits Times, the payments were created to supplement the base salary of senior staff after European Union rules imposed a cap on financiers’ compensation.
HSBC has provided the allowances through share awards in immediately vested stock. The awards have been subject to a retention period intended to maintain alignment between executives’ interests and those of the bank.
The payments are non-pensionable and have been limited to 150% of an individual’s base salary under HSBC’s fixed-pay structure, the news publication said.
In its latest annual report, the bank said fixed pay still accounted for the largest share of bankers’ compensation.
Elhedery has implemented a cost-cutting programme that has reduced benefits previously available to some employees, the report added.
These include education allowances and contributions to private club memberships for staff working in the bank’s Hong Kong-based business.
HSBC has ended an education subsidy in Hong Kong that covered 95% of school fees for the children of new hires and senior staff relocating to the city, added The Straits Times.
