Remuneration, credit crunch style
When it comes to big City payouts, the party’s over. Across the Square Mile, you can almost hear the belts tightening. But for many City workers – including some brokers – bonuses have become a way of life, and a vital means of ensuring staff loyalty. Aon Benfield, for example, has looked to its current bonus round to incentivize staff who may otherwise have been disgruntled by its major merger last year. But now managers face a tough task: they have to manage staff expectations on bonuses and, in some cases, on salaries as well.
Following the crisis in financial services and subsequent global recession, remuneration in general and bonuses in particular have become a massive bone of contention. Nowhere is this more true than at AIG, where the row over executive bonuses has embroiled even the US President. Many AIG executives have now agreed to hand back their bonuses, under pressure from chief executive Edward Liddy, US politicians and the media. However one (Jake DeSantis) resigned last week in protest, writing an open letter to Liddy in the New York Times, accusing him of betraying his staff, and the US government of hounding them. Meanwhile, on this side of the Atlantic, Sir Fred Goodwin’s refusal to pay back his bonus from RBS has led to protestors attacking his him, government intervention and weeks of front page headlines.
So what does all this mean for those working in insurance, at insurers and brokers? Willis, one of the major global brokers, has already asked staff to take unpaid leave in a bid to cut costs, though the other two big brokers, Aon and Marsh, have said they have no plans to follow suit. The major insurers meanwhile have been slashing jobs right, left and centre. So will UK insurance see any bonuses paid at all this year? Or will there be more instances of compulsory unpaid leave, pay freezes or even pay cuts?
One thing is for sure: the days when the champagne flowed freely are long gone, and perhaps workers should be thankful to be in a job, rather than worrying about the size of their bonus.
