Barclays has become the first bank to lift the cap on bankers’ bonuses that was originally imposed by the EU, which will allow employess to earn up to 10 times their salary.
In a memo sent to staff on Thursday, the bank said the new bonus cap “should not change colleague expectations around total compensation”, which will not automatically increase.
Last year financial regulators decided to remove the cap that limited the amount bankers could take home in annual payments. The post-Brexit decision meant UK banks no longer had to follow EU rules.
The EU policy was originally imposed to deter excessive risk taking which was blamed for causing the 2008 financial crash and subsequent worldwide economic meltdown.
The change brings Barclays in line with the policy set by investment bank JP Morgan, amid efforts to attract top bankers.
In May, HSBC shareholders pproved the removal of a limit on bankers’ bonuses. The bank said removing the cap will give the bank more flexibility to reduce fixed pay levels and instead focus more on rewarding staff based on performance over time.
It also said it will help it to attract and retain talented people from international markets outside the EU, where there is no limit on variable pay.
Former prime minister Liz Truss and chancellor Kwasi Kwarteng made the decision to scrap the cap on bankers’ bonuses in 2022, in a bid to encourage more investment in the UK and boost economic growth.
Prior to its election victory, chancellor Rachel Reeves confirmed that Labour had no intention of bringing the cap on bankers bonuses, prompting criticism for some sections of the party, including from former leader Jeremy Corbyn.
Barclays expects some 1,600 employees globally to be affected by the change, known as its “material risk-takers”.
Those members of staff will be able to earn up to 10 times their fixed salary in variable pay, which includes bonuses. Previously, the cap was set at twice the level of fixed pay.
The bank said the change will give it more flexibility when it comes to setting individual bonuses within a small pool of staff, and make it a more competitive place to work.
A spokesperson for Barclays said: “The revised bonus cap will not alter the way Barclays sets its incentive pool, which is based on overall group performance.
“It will allow us greater flexibility to differentiate individual bonuses within a small and defined group of colleagues, enabling Barclays to continue to compete effectively to retain and attract the best talent globally.”
Staff affected by the change will also not see their salaries cut as a result.
Material risk-takers within the EU, incorporating Ireland, will continue to have bonuses capped at twice their salary.
