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Life Working Report 008: Compensation

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This second report in our Life Working series for 2013/4, explores the evolving nature of pay and bonuses on offer in the City.

This second report in our Life Working series for 2013/4, explores the evolving nature of pay and bonuses on offer in the City.

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  • 1. Report 008 Compensation Life Working Series 2013/4 1
  • 2. 1. Introduction Our annual review of City compensation trends during 2013 and the outlook for 2014. This second report in our Life Working series for 2013/4, explores the evolving nature of pay and bonuses on offer in the City. The research for this year’s report was undertaken by online survey between 4th and 18th October 2013. Requests to participate in the survey were sent to 29,914 candidates and clients of Astbury Marsden. A total of 1,509 responses were received and analysed to compile the final report. The information and data contained in this report are for information purposes only and are not intended, nor implied to be a substitute for professional advice. In no event will Astbury Marsden be liable to you or any third party for any decision made or action taken in reliance of the results obtained through the use of the information and/or data contained or provided herein. If you have questions regarding the survey or the report please contact: Mark Cameron mark.cameron@astburymarsden.com +44 20 7065 1175 Jonathan Nicholson jonathan.nicholson@astburymarsden.com +44 20 7065 1221 Cathryn Jowett cathryn.jowett@astburymarsden.com +44 20 7065 1187 2
  • 3. 2. Summary of findings The most significant insights and trends identified in this year’s research. The European Banking Authority, recently found that the number of UK bankers earning at least €1 million increased to more than 2,700 last year, 12 times more than any other country in the EU. Despite the outcry this prompted, this further reinforces London’s dominance as Europe’s financial centre. This year’s report investigates the changes in City workers perspectives and their attitudes towards pay and bonuses in light of increasing Government and regulatory pressures. Average basic salaries rose 5.6% to £85,921 in 2013, double the rate of inflation. Median basic pay was the same for the third year running at £75,000. Looking at the growing gender pay debate, we found that average basic pay for women was 78% of the pay of their male colleagues rising to 81% when viewed on a median basis. However at more junior levels, much more parity of pay between the sexes was seen. Women changing jobs or receiving a promotion saw their pay grow faster than their male colleagues. They also saw a pay increase higher than men when staying with their employer. Basic pay increased across all job levels this year with Managing Directors experiencing a 15% increase in median pay. Average basic pay rose the fastest at Analyst and Associate level increasing 11% and 10% respectively. Just over 60% of staff are still expecting to receive a bonus. This is in line with the 2012 expectations. However, in contrast to previous years where we have seen a decline in bonus expectations, this year we saw 67% of respondents expecting to see no change or an improvement in bonus. This compares to 60% last year. In fact, bonus expectations have increased across most levels except VP where it fell marginally. In 2012, we saw a much lower expectation across senior teams than this year. When considering pay in 2014, we found that women are more optimistic in the coming year. Fewer women expect a decrease in 2014 than they did in 2013. Senior level staff are less optimistic about receiving a pay increase in 2014, specifically Director and Executive Director level staff . The least optimistic sector for pay increases is Corporate Broking & Stockbroking. At a functional level, Sales & Distribution staff were the most optimistic about pay prospects for 2014. 3
  • 4. For the third year running, the primary reaction to a poor bonus is to try to change employer, however, this has dropped since 2012 and we have seen a marginal increase in those who would look for a promotion with their current employer. 59% of staff believe that the bonus cap would encourage staff to exit the sector suggesting that pay is a key driver within financial services. However perhaps surprisingly, it was an almost equal split between those who thought the bonus cap would disincentivise staff and those who didn’t. I hope you find this year’s findings interesting. Mark Cameron Chief Operating Officer 4
  • 5. 3. Basic Pay Exploring changes to the basic rate of employee compensation over the last year. Fig 3.1 Overview During 2013, the average salary across the City was £85,921, a rise of 5.6% on 2012. Median basic pay was £75,000 and has not changed since 2011. During the year, 47% of respondents received an increase, a small rise on 2012. The number who experienced a cut in pay in 2013 fell to 3%. 3.1.1 Recipients of pay changes Changes to basic pay 2013 2012 2011 Respondents receiving an increase 47.0% 45.2% 44.0% Respondents receiving an decrease 3.1% 3.6% 1.2% Increases in pay were made up of the following: • • • • 21% of respondents were promoted during the year, a rise of 4% (Fig 3.1.2) on last year. Those promoted received just over a 15% increase in basic pay, a small rise on the prior year. 28% of city staff changed jobs (Fig 3.1.3), a similar level to the number changing roles last year. By changing employers you could expect to receive a 13.5% increase to your pay. This represents a small rise on 2012. Just over 8% of respondents changed jobs and received a promotion and in return received on average a 24% increase in pay. 67% of employees neither changed employers nor were promoted, these staff saw their basic pay rise by 3.9%. 5
  • 6. 3.1.2 Changes to pay as a result of promotion Average of 15.4% increase for those who were promoted Average of 5.5% increase for those who were not Average of 14.7% increase for those who were promoted Average of 5.4% increase for those who were not 3.1.3 Changes to pay as a result of changing employers Average of 13.5% increase for those who changed jobs Average of 5.3% increase for those who did not Average of 11.5% increase for those who changed jobs Average of 5.1% increase for those who did not “The average salary across the City in 2013 was £85,921” 6
  • 7. Fig 3.2 Gender 3.2.1 Impact on pay of changes in circumstance Women changing jobs or receiving promotions saw their pay rise more quickly than their male counterparts, rising by approximately 20%. When staying with their current employer, they also saw a pay increase higher than men. Changed Jobs 2013 Promoted 2013 No Change 2013 Male 12.6% 14.8% 3.4% Female 19.9% 18.0% 4.7% Gender 3.2.2 Pay equality While there were more women responding this year, they were generally more junior than the men responding. As a consequence, the average and median pay may be distorted. Based on the sample surveyed, average basic pay for women was 78% of the pay of their male colleagues rising to 81% when viewed on a median basis. Drilling into the results and looking at average pay differences based on job level we see the following: Female Male Percentage Analyst/Associate £53,029 £56,684 93% AVP £65,219 £68,457 95% Manager £65,413 £76,516 85% Vice President £90,309 £93,461 97% Director/Executive Director £115,115 £139,832 82% Managing Director £150,000 £201,679 74% Other £64,771 £79,994 81% TOTAL £69,796 £88,932 78% 7
  • 8. Fig 3.3 Job Level 3.3.1 Impact on pay of changes in circumstance When changing jobs, Managing Director level staff could expect to see the largest increases in basic pay. This contrasts significantly with the increases experienced by Managing Directors who did not change jobs and received an increase of just 1.4%. Analyst promotions were the most fruitful at 24%. Interestingly those junior level staff not changing jobs or receiving a promotion received the highest increases in their basic pay. Impact on Pay Job Level Changed jobs Promoted No Change 2013 2012 2013 2012 2013 2012 Analyst 17.7% 14.6% 23.7% 16.6% 8.5% 1.8% Associate 19.3% 12.5% 18.1% 21.1% 5.6% 3.9% AVP 16.6% 15.9% 14.5% 22.2% 3.6% 1.7% Manager 14.4% 17.1% 17.1% 19.5% 3.6% 2.3% Vice President 12.2% 4.0% 12.2% 9.5% 2.0% 3.5% Director/Executive Director 11.3% 6.2% 13.8% 12.1% 2.7% 3.0% Managing Director 29.4% 14.7% 16.7% 11.4% 1.4% 2.1% Other 14.0% 13.5% 15.1% 11.7% 3.0% 11.9% 3.3.2 Shifts in median and average salaries Median pay for Managing Directors grew the fastest in the year, rising by 15%. On an average basis, Analysts and Associates pay was the quickest, rising by approximately 11%. Both average and median salaries fell across all job levels during the year. Job Level Median Salary Average Salary 2013 2012 Variance 2013 2012 Variance Analyst £40,000 £37,100 7.8% £40,844 £36,757 11.1% Associate £52,000 £47,000 10.6% £48,987 £44,563 9.9% AVP £61,000 £57,000 7.0% £55,423 £52,358 7.9% Manager £64,800 £58,197 11.3% £58,105 £54,471 6.7% Vice President £84,000 £80,000 5.0% £77,550 £77,054 0.6% Director/Executive Director £115,000 £110,000 4.5% £106,652 £101,137 5.5% Managing Director £150,000 £130,000 15.4% £145,418 £134,996 7.7% Other £52,250 £47,500 10.0% £55,435 £52,258 6.3% 8
  • 9. Fig 3.4 Function 3.4.1 Impact on pay of changes in circumstances Staff working in Compliance and Internal Audit experienced the largest increases in pay as a result of changing jobs. Perhaps reflecting strong demand for the skill set during the year. Staff working in HR and Risk who chose to remain with their current employer saw the largest increases in their basic pay. Moving jobs this year proved less lucrative for Sales & Distribution staff when compared to last year. Sales & Distribution staff and those not changing employers or receiving a promotion saw their pay fall during the year. Impact on Pay Function Changed jobs Promoted No Change 2013 2012 2013 2012 2013 2012 Compliance 26.8% 12.8% 19.5% 10.1% 5.1% 8.4% Finance 21.5% 5.7% 15.3% 12.7% 2.5% 3.3% HR 22.4% 9.1% 18.7% 19.4% 14.7% 1.8% Internal Audit 33.3% 14.5% 22.2% 23.3% 3.7% 2.2% Operations & Middle Office 12.4% 17.4% 20.3% 11.8% 3.0% 2.1% Revenue Generator 11.0% 13.6% 14.0% 14.9% 3.1% 4.4% Risk 15.2% 8.4% 13.6% 18.3% 8.0% 1.5% Sales & Distribution 11.0% 35.8% 22.0% 8.7% -1.0% 13.5% Strategy & Change 19.3% 12.9% 22.5% 9.7% 4.4% 2.3% Technology 13.4% 13.2% 15.6% 17.6% 3.4% 5.4% Other 11.6% 3.3% 13.2% 12.6% 3.7% 1.8% 9
  • 10. 3.4.2 Shifts in median and average salary Compliance and Revenue Generating staff saw their median incomes rise fastest at a rate of at least 10%. On an average basis, Compliance and HR staff saw their pay rise the quickest, rising by approximately 13%. Function Median Salary Average Salary 2013 2012 Variance 2013 2012 Variance Compliance £80,000 £72,500 10.3% £80,538 £71,344 12.9% Finance £64,800 £60,000 8.0% £69,190 £69,362 -0.2% HR £42,500 £40,000 6.3% £45,580 £40,301 13.1% Internal Audit £71,000 £67,500 5.2% £61,375 £57,500 6.7% Operations & Middle Office £60,000 £55,000 9.1% £62,566 £58,727 6.5% Revenue Generator £88,000 £80,000 10.0% £90,669 £85,454 6.1% Risk £60,000 £55,000 9.1% £65,282 £60,311 8.2% Sales & Distribution £75,000 £70,000 7.1% £84,270 £78,203 7.8% Strategy & Change £72,750 £66,950 8.7% £82,365 £75,844 8.6% Technology £65,000 £62,000 4.8% £64,742 £61,180 5.8% Other £48,000 £45,000 6.7% £59,626 £56,269 6.0% 10
  • 11. Fig 3.5 Sector 3.5.1 Impact on pay and changes in circumstances The greatest impact on pay for those changing jobs was experienced by those changing jobs into regulators. The sector experiencing the largest increases in basic pay were retail banks and building societies whose employees saw a 14% rise. For those who remained loyal to their current employer, without promotion or changing jobs, the highest increase in base pay was in building societies, non financial services firms and insurers. Impact on Pay Sector Changed Jobs 2013 Promoted 2013 No Change 2013 Commodity Trading 18.5% 25.7% 1.4% Corporate Broking & Stockbroking 0.9% 17.0% 0.0% Exchanges & Trading Platforms 12.2% 19.6% 3.2% Fund Services 12.0% 12.9% 3.8% Insurance 19.0% 15.9% 5.1% Investment Banking 14.1% 15.5% 2.8% Investment Management 13.5% 14.2% 3.8% Non Financial Services 18.5% 19.8% 5.6% Payments, Clearing, Custody & Counterparty 3.2% 18.3% -1.7% Private Banking & Wealth Management 17.8% 13.5% 3.7% Private Equity 5.3% 12.5% 4.3% Ratings Agencies 9.6% 11.9% 0.5% Regulators 27.6% 8.7% 3.3% Retail Banks & Building Societies 14.4% 11.2% 14.3% 11
  • 12. 3.5.2 Shifts in median and average salaries Median pay for regulators grew sharpest in the year rising by 16%, followed by private equity, private banking, non financial services firms and exchanges where pay rose between 12-13%. Regulators also saw average pay grow strongly although retail banks, and non financial services firm also saw strong average pay growth. Sector Median Salary Average Salary 2013 2012 Variance 2013 2012 Variance Commodity Trading £75,000 £70,000 7.1% £77,254 £73,704 4.8% Corporate Broking & Stockbroking £63,000 £60,000 5.0% £65,143 £67,310 -3.2% Exchanges & Trading Platforms £56,500 £50,500 11.9% £61,891 £59,563 3.9% Fund Services £54,250 £53,500 1.4% £52,227 £49,052 6.5% Insurance £50,000 £45,000 11.1% £52,889 £50,427 6.9% Investment Banking £76,450 £72,000 6.2% £77,842 £74,759 4.1% Investment Management £65,000 £60,000 8.3% £66,607 £62,008 7.4% Non Financial Services £45,000 £40,000 12.5% £50,548 £45,167 11.9% Payments, Clearing, Custody & Counterparty £72,750 £74,000 -1.7% £75,665 £75,296 0.5% Private Banking & Wealth Management £77,500 £68,500 13.1% £78,096 £72,046 8.4% Private Equity £65,000 £57,500 13.0% £70,045 £66,818 4.8% Ratings Agencies £57,000 £57,000 0.0% £53,500 £50,000 7.0% Regulators £90,000 £77,500 16.1% £79,306 £70,611 12.3% Retail Banks & Building Societies £66,000 £65,000 1.5% £74,530 £65,973 13.0% 12
  • 13. 4. Bonus Expectations A look at attitudes towards bonus payments for the current year. Fig 4.1 Overview 4.1.1 Overall bonus expectations Overall bonus expectations were very similar year on year with just over 60% of respondents anticipating receiving a bonus. 4.1.2 Expectation of change in bonus Unlike previous years where bonus expectations have deteriorated further each year, this year we saw more than two thirds of respondents expecting no change or an improvement to their prior year bonus. This compares with just under 60% last year and is the first time we have seen a shift in sentiment since 2010. However, it should be noted that one third of respondents expect no change to their bonus. 13
  • 14. Fig 4.2 Once again in 2013 the expected bonus amount for men exceeded that for women, this is affected by the spread of more junior women responding to the survey. However, it should be noted that the proportion of pay for women expected in the form of bonuses fell to roughly 16% of average salary while the ratio for men rose to almost 30%. Gender 2013 Gender 2012 Amount % Average Salary % Expecting a bonus Amount % Average Salary Female £11,332 16.2% 62.2% £11,093 17.2% Male £26,546 29.6% 60.8% £23,458 26.8% Prefer not to say £26,000 20.7% 20.0% £17,571 23.8% TOTAL £23,944 27.9% 60.7% £21,312 24.8% Fig 4.3 Job Level Bonus expectations rose at almost all levels, apart from at VP level where it fell as a proportion of pay, but rose in nominal terms. Analysts staff saw bonuses fall in normal terms and remain proportionally flat. 2013 Job level 2012 Average bonus % Average Salary % Expecting a bonus Average bonus % Average Salary Analyst £4,552 11.1% 55.7% £4,972 11.3% Associate £13,456 27.5% 67.7% £6,934 13.7% AVP £13,181 23.8% 67.4% £11,299 18.2% Manager £11,840 20.4% 60.1% £11,254 14.0% Vice President £24,584 31.7% 70.6% £21,688 35.8% Director/Executive Director £51,781 48.6% 69.5% £49,214 44.4% Managing Director £166,955 114.8% 59.0% £115,618 87.9% Other £11,076 20.0% 42.4% £20,249 30.7% TOTAL £23,944 27.9% 60.7% £21,506 25.5% Looking at the comparatives based on job level. Female Male Percentage Analyst/Associate £7,010 £7,884 89% AVP £9,888 £13,742 72% Manager £5,695 £13,392 43% Vice President £18,475 £25,248 73% Director/Executive Director £32,239 £55,848 58% - £172,524 - Other £9,717 £11,469 85% TOTAL £11,332 £26,546 43% Managing Director 14
  • 15. Fig 4.4 Function Bonus expectations rose as a proportion of pay across most functions with Revenue Generators and Sales & Distribution staff expecting the highest bonus amounts. As a proportion of income, bonus expectations for Risk and Strategy & Change staff fell significantly over the year. Could this be a signal that business as usual is returning? Firms are shifting their focus from transformation and risk to more business as usual endeavours. 2013 2012 Function Average Bonus % Average Salary % Expecting a bonus Average Bonus % Average Salary Compliance £18,572 23.1% 65.0% £6,708 10.1% Finance £26,389 38.1% 71.9% £29,526 37.8% HR £20,857 45.8% 64.7% £8,457 17.3% Internal Audit £16,962 27.6% 68.8% £23,410 25.3% Operations & Middle Office £17,143 27.4% 59.5% £18,193 33.7% Revenue Generator £94,148 103.8% 68.7% £61,507 81.2% Risk £20,869 32.0% 64.8% £26,800 40.0% Sales & Distribution £63,297 75.1% 81.8% £31,684 36.1% Strategy & Change £20,382 24.7% 62.0% £45,821 68.7% Technology £15,840 24.5% 54.7% £10,759 14.0% Other £23,555 39.5% 58.1% £27,615 33.6% TOTAL £23,715 27.6% 60.8% £21,506 25.5% 15
  • 16. Fig 4.5 Sector The highest bonus expectations are held by staff working in Private Equity and Commodity Trading, the lowest expectations are amongst employees working in Ratings Agencies, Exchanges and within Fund Services firms. The greatest spread of bonuses is expected amongst Payments, Clearing, Custody and Counterparty firms, Private Equity with Commodity Trading and Investment Management firms also holding high expectations. 2013 2012 Sector Average Bonus % Average Salary % Expecting a bonus Average Bonus % Average Salary Commodity Trading £59,372 76.9% 68.5% £17,091 28.0% Corporate Broking & Stockbroking £22,947 35.2% 47.6% 5,458 8.4% Exchanges & Trading Platforms £9.974 16.1% 55.7% £12,993 16.8% Fund Services £9,547 18.3% 54.8% £23,350 35.5% Insurance £12,262 22.8% 64.2% £14,648 21.1% Investment Banking £30,439 39.1% 61.4% £21,155 28.5% Investment Management £32,987 49.5% 68.7% £48,403 67.8% Non Financial Services £13,519 26.7% 46.3% £15,451 26.9% Payments, Clearing, Custody & Counterparty £27,190 35.9% 73.5% £17,128 24.3% Private Banking & Wealth Management £15,633 20.0% 58.3% £15,162 22.6% Private Equity £71,684 102.3% 72.7% £50,675 51.1% Ratings Agencies £4,250 7.9% 60.0% £5,500 9.2% Regulators £15,821 19.9% 61.1% £7,917 8.2% Retail Banks & Building Societies £14,839 19.9% 60.7% £14,616 19.5% TOTAL 23,944 27.9% 60.7% £21,506 25.5% 16
  • 17. 5. Expectations & Reactions The sentiment of City staff towards pay prospects for 2013. Fig 5.1 Overview Expectations of pay increases remain similar to last year with 45% anticipating a rise in pay. 5.1.1 Expectation of salary increase Fig 5.2 Gender 5.2.1 Similar expectations towards pay increases are felt by both men and women with females very slightly more optimistic. It should be noted that more than 30% of men and women expect a decrease in 2014, suggesting that pay will come under pressure next year. Expectation of salary increase 17
  • 18. Fig 5.3 Job Level Junior staff were more optimistic than senior staff about pay prospects for the coming year. Fig 5.4 Function Administration and Internal Audit staff were the least optimistic about pay prospects for the coming year. Compliance, Operations and Strategy staff expect pay to come under pressure. Sales & Distribution, Revenue Generators and Finance staff are the most optimistic. 18
  • 19. Fig 5.5 Sector Payments, Clearing, Custody & Counterparty, Commodity Trading, Ratings Agencies and Retail are the most optimistic sectors. Corporate Broking & Stockbroking, Investment Banking and Private Banking & Wealth Management expect continued pay pressure in the coming year. Fig 5.6 Bonus Dissatisfaction 5.6.1 Action taken if dissatisfied with bonus payment There has been a fall in appetite to change roles this year, however 45% would still consider a move. In contrast, we have seen a substantial increase over the last 3 years towards seeking out new opportunities with an existing employer. Employees are less keen to move abroad, with the lowest levels since 2010 who would consider the move. 19
  • 20. Fig 5.7 Bonus Cap UK banks are in the process of preparing themselves for the EU bonus cap which will take effect in 2014 to limit bonus payments but how will it affect recruitment in the City? 5.7.1 Exit Financial Services 5.7.2 Exit London The majority of respondents felt that the bonus cap would encourage staff to exit the financial services sector. Over half of respondents concluded that the impact of EU caps would be to make other locations more attractive. 5.7.3 Reduced Incentive There is an almost 50/50 split between those who think that the bonus cap will disincentivise employees to perform and those who do not. 20
  • 21. About Astbury Marsden We specialise in recruiting uniquely talented people in business technology, business transformation, regulatory and assurance functions and specialist technical skills. We intimately understand the dynamics of the financial services, energy and professional services markets; making sure we know the people our clients need to occupy critical roles throughout their business. We help clients determine the people they need and then we find the best of them. We have a global perspective and we are territory-neutral. We look for market identifiers that we recognise, and apply our experience and intelligence to solve the challenges they face. Our regional hubs established in London and Singapore allow us to serve our clients across EMEA and throughout Asia. You can find more out at www.astburymarsden.com London Singapore Jonathan Nicholson 60 New Broad St, London EC2M 1JJ +44 (0)20 7065 1222 Mark O’Reilly Singapore Land Tower, 50 Raffles Place, Singapore 048623 +65 6829 7122 21