UBS Offers Raises To Senior Bankers To Offset Bonus Cuts, Convince Them To Stay

Regular readers may remember that the battle for top banking talent in Switzerland is, apparently, extremely fierce. A corporate espionage saga that was launched by UBS’s strategic poaching of a top Credit Suisse banker led to the ouster back in February of Tidjane Thiam, CS’s former CEO.

So as megabanks around the world prepare to cut bonuses for their top traders and bankers once again despite a surge in IB profits, UBS has engineered a cunning new compensation plan that will effectively trick its top workers into thinking they’re getting paid more, while actually paying them less.

According to Bloomberg, the scheme will entail changes to the “compensation structure”, essentially slashing bonuses while upping their base pay. For some managers, base pay could climb by 20%.

Plus, lowering attrition will also allow the bank to cut down on costs associated with spying on its most productive employees.

A review at Switzerland’s largest bank found differences in base pay among employees in the same roles, and when compared with competitors, people familiar with the plans said. As a result, UBS will increase fixed compensation for those it found were underpaid while reducing their variable pay, the people said.

The changes come as competition for top bankers heats up, with Julius Baer Group Ltd. and Credit Suisse Group AG poaching teams from UBS in recent months. At the same time, retaining talent with the promise of large bonuses is getting harder as the Covid-19 pandemic puts a spotlight again on banks’ variable compensation.

“UBS regularly analyzes its total compensation structure,” a UBS spokesman said. “As a result, we will adjust selectively certain salary levels to remain competitive. However, we view any change in salary as total compensation neutral.”

At UBS, bonus pools for 2020 are expected to be allocated next month and awarded to staff in the first quarter. Up until now, line managers had used variable compensation to make up for the pay inequities, the people said. Going forward, bonuses will be used to reward employees for out-performance.

Changes will be made “retroactively” from Jan. 1, meaning the chosen employees – executive to managing directors – will likely see a fattened payout in Q1 as the retroactive pay hits right around bonus time.

The story is apparently of keen interest to bankers…

Good Monday morning. This was the most-read story on @TheTerminal during the past 24 hours, as of 9:30 am NY time:

UBS is tweaking compensation and here’s why 👇https://t.co/OkTN7RERJz

— Beth Williams Liou (@BWilliLiou) October 26, 2020

…today, UBS is bucking the industry trend by handing out raises to its top managers. What’s next? Will the bank move to make ‘WFH’ permanent?