Dig deeper into RBS bonus culture
Ministers should not be getting tough with RBS (LON:RBS) for paying bonuses to investment bankers – it should be getting tough with the bank for paying any bonuses at all, even to counter staff at NatWest or Coutts.
The bonus culture affects not only highly paid financiers and directors but extends throughout much of commercial (and uncommercial) Britain to its lowest levels. The annual “bonus” is an automatic and expected part of pay for many workers, often actually formalised as a thirteenth month of salary at Christmas.
Bonuses should be for exceptional performance, not a universal benefit. And they should thus be for the minority of staff producing special results, not standard payments to the majority.
Yet the routine bonus has extended from the profit-making sector across much of the UK workforce. Civil service bonus payments are common but the recent row over the £47m paid so far this year at the Ministry of Defence highlights how readily they are handed out: some 50,000 of the 85,000 bureaucrats have had their pay packets enhanced – which presumably means bonuses for even the below-average performers.
That the average sum at the MoD is under £1,000 is not the point (but including so many people in the bonus package does keep down the average, despite some handsome payments to a few). If this is pay, pay it as such.
Bonuses did not bring down RBS or its Scottish rival, HBoS, but the idea of making even small payments to junior staff at those banks now is preposterous. Staff at branches and admin centres may not have given the loans or bought the investments that brought down their banks, but the bonuses paid in the past to junior employees were possible because of the risks taken elsewhere and these workers must be made to realise how close their banks came to collapse. They are lucky to have a job at all.
Indeed, many thousands of staff at RBS and Lloyds/HBoS no longer have a job at all – and that belies the argument that unless bonuses are paid, workers will go elsewhere. When so many are being laid off, supply and demand says that bonuses are not necessary to recruit or retain employees. That applies as much in the public sector as in the City and if the combination of recession and financial crisis means the bonus culture can be broken, then about time.
