UBS to Boost Fixed Pay, Cut Bonuses in Comp Revamp

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.

Investment banks have seen bumper revenue this year, in part thanks to stimulus measures from governments and central banks. Paying out large bonuses for that performance may be hard to explain at a time when workers elsewhere are losing their jobs.

European regulators have already called on banks to limit bonuses during the pandemic to help maintain their financial strength and keep lending.

Controversial Bonuses

Variable compensation has long been controversial in Europe. European Union lawmakers capped bonuses in 2013, adopting what was then the world's toughest bonus rules in a bid to tackle a corporate culture blamed for contributing to the 2008 financial crisis.

Under the rules, banks can't pay staff who meet certain criteria bonuses that exceed their annual fixed pay, unless shareholders approve a doubling of the cap. Some countries have taken an even stricter approach.

Switzerland, where UBS is based, requires that shareholders in public companies sign off every year on executive and board compensation, also a rule introduced after the financial crisis.

The new compensation structure at UBS affects employees in every region from executive directors to managing directors that the bank does not want to lose, the people said. The change will be made retroactively from Jan. 1, 2020.

UBS has already made a number of other changes to its compensation policies, including allowing staff to collect bonuses more easily after leaving the bank as the pandemic prompts more workers to reconsider their careers.

The bank is also paying employees in less senior ranks an additional week's worth of salary.

Related: UBS Nabs 3 Wells Fargo Advisors Management More Than $400 Million

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