That was the finding of a new global survey by consultants Mercer, which asked banks, insurers and investment managers around the world about their approach to payments. It found that the majority of firms have actually increased fixed salaries by more than five per cent - but that bonus payments have fallen by a similar amount.
With this in mind, we asked some leading financial advisors for their thoughts on the fixed salary versus bonuses debate: and which is the better approach for business?
“I just moved from employee status to independent contractor status, so I just finished putting new contracts in place for my staff,” said John DeGoey, portfolio manager at Burgeonvest-Bick. “I determined my own point of indifference and then I gave both my assistants the option of either lower base and higher bonus or higher base and lower bonus. Ironically, one chose the former and the other the latter.
“My point is that I was indifferent between the two options and felt either choice would be fair and honourable. As long as the advisor believes the compensation is fair (irrespective of the choice made), then the optimal mix between base and bonus ought to rest with the employee. To me, having happy employees is key – and giving them input (and allowing them to choose) regarding how their compensation ought to be structured goes a long way to getting buy-in.”
Brad Jardine, president and senior financial advisor for CIC Financial, meanwhile, believes incentives are the key to getting more from your staff.
“Performance will always slip when there’s less incentive, it’s generally human nature,” he said. “Governments know it as less tax revenue will be generated if marginal tax rates get too high - the perceived wealthy taxpayers will find another way or simply work less as there’s limited incentive to work harder.
“A good manager will also say that he/she would prefer their best employees and salespersons make more than they do based on performance - just make sure the performance induced compensation is ethical and compliant.”
According to the survey, base salaries in the financial services industry are expected to rise by two-three per cent on average: with a rise of 2.5 per cent predicted in North America.
Staff bonuses are falling and fixed salaries are rising.