- Pay freeze reversed after employee `feedback,' memo says
- Europe's largest bank is seeking $5 billion in savings by 2017
HSBC Holdings Plc Chief Executive Officer Stuart Gulliver canceled a global pay freeze after less than two weeks following an employee backlash, according to two people with knowledge of the matter.
“We have listened to feedback and as a result decided to change the way these cost savings are to be achieved,” Gulliver said in a memo sent to staff on Thursday, which was confirmed by an HSBC spokeswoman. “We will proceed with the pay rises as originally proposed by managers as part of the 2015 pay review, noting that, consistent with prior years, not all staff will receive a pay rise.”
Gulliver imposed a global freeze on hiring and compensation at Europe’s biggest bank on Jan. 29 as part of HSBC’s drive to cut as much as $5 billion in costs by the end of 2017. Banks are attempting to roll back compensation as plunging stock markets and oil prices look likely to exacerbate bleak earnings prospects. UBS Group AG froze investment bank salaries this week and Barclays Plc extended a freeze on hiring new staff indefinitely in December, while Credit Suisse Group AG and Deutsche Bank AG are cutting thousands of jobs.
HSBC staff have been complaining to managers since the pay freeze was announced, which would have cancelled increases already recommended as part of the bank’s 2015 pay review, said the people, who asked not to be identified because they’re not authorized to speak publicly on the matter. While Gulliver was forced to reverse his decision on bonuses, the hiring freeze remains in place, according to the memo.
The 2015 “pay rises will be funded from the 2016 variable bonus pool (for bonuses to be paid in 2017), the total quantum of which will be determined by our 2016 performance,” Gulliver said in Thursday’s memo. “To be clear, the 2015 variable bonus payments to be paid in 2016 will not be affected by this action.”
In June, HSBC outlined a three-year plan to pare back its vast global network by shutting money-losing businesses and eliminating as many as 25,000 jobs. HSBC’s board meets this Sunday to decide whether to shift its headquarters from London, partly because of the tax burden and tougher regulatory scrutiny in the U.K., people with knowledge of the decision said Wednesday. The lender releases full-year earnings on Feb. 22.
The shares fell 3.8 percent to 424.75 pence at 10:37 a.m. in London, extending losses this year to about 21 percent. They dropped 12 percent in 2015.
The bank had justified the pay and hiring freezes as “necessary precautionary measures to control payroll costs given the unsettled macro-economic outlook for 2016,” according to the original Jan. 29 memo. They were intended to remain until the end of the year and applied globally across all businesses.