It says there will be “no reward for failure” and as a result it has promised that no bonuses or pay increases will be made to staff associated with the major losses suffered in 2008. All board executive directors will also receive no bonus for 2008 performance and no pay increase in 2009.
It has also pledged a pay freeze for directors and executives in the group worldwide, and for most staff in the US and the global division. On average, other staff below manager level will receive below inflation pay rises, to be agreed with the union, Unite.
RBS has admitted that it will have to pay out £175m in legally binding guaranteed bonuses, and will be offering a monthly award package to staff below managerial grade, beginning in 2009. The bank says average salary for this group is under £19,000. All staff who are “essential to the bank’s recovery” and who might otherwise be at serious risk of leaving will receive a deferred award for 2008, which will be released in three equal annual instalments beginning June 2010.
RBS Group chairman Sir Philip Hampton says: “A fundamental reform to pay and reward is needed to reflect the reality of the situation the company is in. The Board is satisfied that this approach will be seen by most reasonable observers to have balanced difficult conflicting issues. We fully recognise, as a Company, that we have to change materially not just the business we do but also the way we do business.
” We need to retain, motivate and attract talented people to restore the fortunes of the Company. We will try to do that whilst being among those banks leading the industry in changing the way we operate.
“This approach also means that we now can offer some certainty to our employees to enable them to plan ahead financially. Our staff have had to contend with significant anxiety over recent weeks and months over a situation that the vast majority bore no responsibility for creating.”