RBS middle managers to pocket 5% pay rise

Published on Thursday 4 March 2010 21:39

THOUSANDS of RBS staff are to be given a 5 per cent increase in salary, backdated by more than a year, after the part-nationalised bank conceded defeat over its decision to scrap an annual bonus scheme.

Covering "managerial staff", the deal, which was explained to workers this week, is understood to cover 16,000 RBS employees, including thousands at its Gogarburn headquarters.

RBS is understood to have increased staff salaries to prevent legal action, which it expected to lose, over its decision to scrap an annual bonus scheme which staff had been promised.

All affected staff will see a 5 per cent increase, while March's pay packet will include monthly payments dating back to last January. It believed that move will cost the Edinburgh-headquartered bank between 30 million and 40 million a year.

RBS insisted last night that none of the staff receiving the increase worked at its investment banking business, where staff recently shared bonuses of around 1 billion. United Kingdom Financial Investments (UKFI), which manages the UK taxpayer's stake in RBS, has been told.

The latest dispute stemmed from the bank's decision to pull out of its own "profit share scheme" under which all UK staff were awarded a payment equivalent to 10 per cent of their basic salary every April for more than a decade.

When the government took a majority stake in RBS a year ago, its board came under pressure to scrap all bonuses which it was not legally required to pay. Sources at RBS said it had struck a deal with Unite to reduce the payment to 5 per cent of the annual salary. However, UKFI intervened and the agreement was scrapped.

While lower-paid clerical workers were given a 10 per cent increase in basic salary as compensation, "managerial" staff claimed they had effectively been given a 10 per cent pay cut.

The withdrawal of the scheme immediately led to private threats of legal action from mid-level staff who believed they played no part in RBS's troubles and were legally entitled to the "bonus".

Despite the name of the scheme implying it was based on the bank's financial performance, in 2007 Sir Tom McKillop, then the RBS chairman, wrote to all staff suggesting that the sum would be paid, come what may.

The letter, obtained by The Scotsman, said that the board was so confident in the bank's future prospects, that it had decided to "remove the uncertainty" over the payment. Sir Tom added: "For 2007 and future years, profit share will be set at 10 per cent of base salary and all eligible employees will receive this non-pensionable payment in March each year."

While RBS initially played down the dispute, it is understood that it has now decided to settle the matter because of advice that it would probably lose in court.

In a statement, RBS said that in February 2009, it had announced a "fundamental" change in its approach to remuneration, but Unite had challenged its decision to withdraw the profit share scheme for managerial staff.

"An agreement has now been reached with Unite which prevents further challenge," a spokesman said. "This affects less than one in ten of our staff and does not include any individuals based outside the UK and Ireland or within our investment bank."