Goldman Sachs has notified employees at its London office that it will eliminate caps on banker bonuses, making it the first major bank to capitalise on contentious changes to UK pay regulations.
The Wall Street institution conveyed this shift to staff via video yesterday, a move anticipated to be replicated by competitors. “This approach gives us greater flexibility to manage fixed costs through the cycle and pay for performance,” Goldman said in a statement. “It brings the UK closer to the practice in other global financial centres, to support the UK as an attractive venue for talent.”
In October of last year, the UK abolished the cap on banker bonuses that it had inherited from its time as an EU member. This move was a component of the UK government's post-Brexit efforts to enhance the City of London. However, pay consultants have expressed scepticism regarding whether this change will result in substantial alterations to compensation.
“We are a global firm and to the extent possible we adopt a consistent global approach across everything we do,” said Richard Gnodde, chief executive of Goldman Sachs’ international subsidiary, in remarks during a video message to staff, portions of which were seen by the media. “The bonus cap rules were an important factor preventing us from being consistent in the area of compensation.”
The EU implemented the cap in 2014 in response to the global financial crisis, restricting bonuses to twice an employee's base salary.
