Bankers and their contractual bonuses

There is justifiable outrage over the proposals by banks to pay huge bonuses despite being bailed out with taxpayers’ money.

The banks claim that these payments are contractual and they can’t get out of them. Hey, we’d like to not pay ourselves lots of money but, you know, the law is the law and our hands are tied.

Of course, this is complete and utter bullshit!

Contacts of employment can, in extreme circumstances, be varied unilaterally by the employer. They must follow a consultation process and give full contractual notice but, as a last resort, employers can impose changes. How else would companies impose pay cuts or unpopular restructures on their employees?

Employees have the option of suing for breach of contract or, if they refuse to accept the terms, unfair dismissal. Tribunals require an employer to demonstrate a sound business reason for the change. If there is such a reason and if the proper procedure is followed, tribunals usually find in the employer’s favour.

As business reasons go, they don’t come much sounder than the collapse of the company but for a huge injection of government cash. If the bankers were given proper contractual notice that bonuses were not going to be paid this year, a tribunal would probably uphold the decision. In any case, with the job market in financial services being almost completely at a standstill, most bankers would probably grin and bear it rather than attempt to take their employers to court.

That said, it may now be too late to give contractual notice that bonuses won’t be paid. But, when the government offered cash to the banks last year there would still have been time. When companies take over other companies, or acquire large stakes in them, they go through a due diligence process to find out if they are letting themselves in for any hidden financial obligations. HR due diligence is a key part of that process. Except, it seems, when the new shareholder is the government.

Compulsory changes to their contracts of employment, legally justified by compelling business needs, are something that many employees will face during this recession. Pay cuts, short-time working and sabbaticals on half-pay have already been introduced by firms desperate to save cash. If done properly, although they are changes to employees’ contracts, these measures are legal.

But, as usual, it seems as if bankers operate in a different world. Pay cuts and other compulsory changes to contracts are for the little people. The privileged few who have landed the rest of us in this mess get treated differently.

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7 Responses to Bankers and their contractual bonuses

  1. tbrrob says:

    They shouldn’t have given them any money. That was the only way to guarantee that people were not paid for failure and the most sensible long term economic policy.

  2. Jo says:

    It’s peculiar. It is clear the senior managers have not done their jobs and the question is why they have any pay at all? A bold Chairman of the Board would start there. Show me what you did well.

    But then our silence about the responsibilities of the Boards of Directors is the most puzzling thing of all.

    Oh I was going to tag you but I thought you were on holiday. Consider yourself tagged! 25 things we don’t know about you! And tag 25 more!

  3. Rick says:

    Oh Hell, 25 things? You must think I’m more interesting than I really am.

  4. jonty says:

    Banker pundit on working lunch today said the swiss bank “credit suisse” had decided to pay bonuses to staff in “toxic assets”…

  5. Rick says:

    Now that’s what I call a creative remuneration strategy.

  6. Tim J says:

    “That said, it may now be too late to give contractual notice that bonuses won’t be paid”

    Isn’t this rather the point? It’s one thing to alter contractual conditions on taking over the bank (as the Government have effectively done). It’s another to wait until the day bonuses are due to be paid and then try and alter them.

    As for next year’s bonus, I’d be surprised if there are nearly as many guaranteed bonuses.

  7. John says:

    How about a negative bonus.

    Sounds stupid but so does giving a bonus to greedy wasters sound stupid as well.

    The disease is in Irish banks as well and they are using the same excuse – contracts.

    Still the same old boy network in operation!

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