Wall Street bonuses could plunge 40% this year. An industry consultant lays out 5 ways firms may get creative on comp to keep morale up.

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While many industries have seen dramatic reductions in their workforces as a result of the coronavirus pandemic, most of Wall Street is still at work, albeit from home.
But the coronavirus pandemic and tough market conditions could still impact Wall Street workers, especially when it comes time for bonus pay.
While bankers and investment professionals often rake in six-figure salaries, annual bonuses can far exceed base comp for top performers.
Bonus pay on Wall Street could fall by as much as 40%, according to compensation consulting firm Johnson Associates.
From getting creative with non-cash bonuses to limiting executive pay, here are some of the things that HR execs on Wall Street could when it comes time to talk compensation.
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The coronavirus pandemic is having a huge impact on the US workforce. Employees across industries including airlines, hotels, restaurants, and retailers have been laid off or furloughed. But while weekly jobless claims have spiked to a record 3.3 million, those who are able to work remotely have been less impacted so far.

Wall Street, for one, is still at work, albeit from home. But employees of banks and investment firms could still feel the impact of the pandemic and the recent economic downturn. A “perfect storm” of the coronavirus pandemic and challenging market conditions could mean a hit to Wall Street employees’ pay, according to Alan Johnson, managing director of compensation consulting firm Johnson Associates.

While bankers and investment professionals often rake in comfortable six-figure salaries, annual bonuses can far exceed base comp for top performers. But those bonuses are tied both to individual performance and a pool determined by how their division or firm itself is doing.

Overall incentive-based pay, or bonuses, could fall by as much as 30% to 40% this year, according to Johnson. The consulting firm regularly forecasts compensation expectations, and it arrived at this prediction through talking to clients and doing its own analyses, Johnson said.

“In the [2008] financial crisis, bonuses went down by 50% or more,” Johnson said, “so 30% to 40%, or 35% in the middle of that range, is a significant drop but not as severe as the financial crisis.”

“But this is a big deal,” said Johnson.

To be sure, Johnson’s prediction of a fall in bonuses can be attributed to more than the coronavirus pandemic.

“There’s just less revenue to go around,” Johnson said. Between pressure from clients to lower fees and new, lower-cost products like ETFs gaining in popularity, many financial services firms like asset managers and hedge funds have struggled to find revenue growth.

“There is compression of revenues, and then other things become more expensive,” Johnson said, from technology to developing new products to paying top talent.

“For the generic financial services firm that’s doing a good but not great job, there’s just less money available for compensation, particularly for average people,” Johnson said.

In a recent presentation to the Financial Markets Total Rewards Group, an audience of senior financial services HR professionals, Johnson gave advice …read more

Source:: Businessinsider – Finance


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