Crackdown urged as City bonuses hit record high

Union leaders have called for action on City bonuses after new figures revealed they are rising six times faster than average wages.

Analysis of official data by the Trades Union Congress (TUC) found that bonuses in the financial and insurance sector grew by 27.9 per cent over the last year when average wages in the same period only increased by 4.2 per cent.

The average bonus awarded in the finance and insurance sector rose from £3,146 in the first quarter of 2021 to £4,021 in the first quarter of 2022, although payouts among the top earners will have been significantly higher.

City bonuses in March 2022 were worth a total of £5.9 billion and the TUC warned that the figures suggest that City executives’ bumper bonuses of the pre-financial crash era are back. The TUC said the figures put City bonuses at the highest since records began, and dwarf average pay in almost all sectors.

TUC general secretary Frances O’Grady said: “There is no justification for such obscene City bonuses at the best of times – let alone during a cost-of-living crisis.

"While City executives rake it in, millions are struggling to keep their heads above water. Working people are at breaking point, having been left badly exposed to soaring bills after a decade of standstill wages and Universal Credit cuts.”

Ms O’Grady said the UK government needs to take action by putting workers on company pay boards and introducing maximum pay ratios, stating: "Ministers have no hesitation in calling for public sector pay restraint, but turn a blind eye to shocking City excess. It’s time to hold down bonuses at the top – not wages for everyone else.”

Bonuses for City workers are rising at more than six times the level of average wages, according to research by the TUC. Picture: Dan Kitwood/Getty Images.

She also said it was important for the government to get wages rising across the economy by boosting the minimum wage immediately, funding decent pay rises for all public sector workers, and introducing fair pay agreements for whole industries.

With inflation galloping, she said real wages across the economy are down by £68 a month compared to a year ago. “The situation is even more stark for public sector workers, with real wages in the public sector down by £131 a month compared to a year ago.”

Sectors

The TUC wants the minimum wage increased immediately to at least £10 an hour from £9.50 for all workers irrespective of age. Beyond the finance and insurance sector, the TUC said other sectors are turning to one-off bonus payments, potentially hampering more sustained rises in pay.

It said firms could be using bonuses as opposed to consolidated pay rises to attract new recruits and retain existing staff.

The TUC warns this is a “sticking plaster approach” and won’t fix the fundamental problems in the labour, market which have caused supply-chain chaos and worker shortages.

The Living Wage Foundation, the charity that sets a voluntary pay rate that aims to reflect the cost of living, last week announced it will bring forward the announcement for the 2022/23 rate to September from November because of high inflation.

The foundation said it would encourage employers to pay the new rate as soon as possible. The “living wage” is currently £9.90 per hour and £11.05 per hour in London.