HSBC plans to remove fixed-pay allowances for senior staff and put more of their compensation into performance-linked bonuses, giving the bank greater flexibility over payroll costs while making bankers’ earnings less predictable.
The new system is scheduled to begin at the start of 2028, according to an internal memo reported by Bloomberg News on October 12. An HSBC spokesman told Bloomberg the approach would strengthen the bank’s ability to reward performance and attract talent. The precise changes to individual employees’ packages have not been publicly disclosed.
For affected bankers, the distinction is straightforward. An allowance is part of fixed compensation, paid independently of an annual bonus decision. Moving more pay into bonuses makes a larger portion dependent on performance assessments. It can increase potential rewards, but it also leaves more income exposed when results disappoint.
Removing an allowance does not, by itself, establish how much an employee’s total annual pay will fall or rise. That depends on the replacement package and the bonus ultimately awarded. The reported policy therefore signals a change in the balance of pay, rather than a uniform reduction across senior staff.
The shift reverses a compensation structure that expanded after Europe introduced its banker bonus cap. The rules restricted variable pay relative to fixed remuneration, rather than imposing a ceiling on total earnings. Banks increased salaries and introduced role-based allowances, locking more compensation into their recurring costs.
Britain’s Prudential Regulation Authority and Financial Conduct Authority removed the cap effective October 31, 2023. In explaining the decision, regulators said the restrictions had encouraged higher fixed salaries and allowances that were not necessarily linked to longer-term performance.
That matters when business slows. Fixed compensation remains a payroll obligation even if revenue weakens. A larger variable component gives a bank more room to adjust rewards to its results, sharing some of the financial impact with employees. Regulators identified that flexibility as one reason for changing the rules.
The regulatory change also allows British banks to compete more directly for staff in financial centers where the same bonus cap does not apply. For HSBC, the challenge is balancing that recruiting flexibility with employees’ preference for dependable earnings. A larger potential bonus must be attractive enough to compensate for losing guaranteed pay.
HSBC has already changed compensation at the top. Its audited 2025 remuneration table shows Chief Executive Georges Elhedery received a base salary of £1.479 million and no fixed-pay allowance. His total disclosed remuneration was £6.623 million, including annual and long-term incentives, benefits and pension payments.
Elhedery became group chief executive in September 2024. The staff proposal extends the broader movement toward performance-based compensation beyond the executive package.
The bank’s annual report also records $3.93 billion in total incentive awards approved for 2025, compared with $3.80 billion for 2024. That is an increase of approximately 3.4%. It illustrates the scale of HSBC’s existing variable compensation, although it does not predict the size of future awards under the new structure.
For shareholders, more variable pay could help protect earnings during weaker periods. For employees, the practical questions include the bonus opportunity replacing the allowance, the performance measures used and when awards become available. A headline maximum bonus is different from money that is actually earned and paid.
The change concerns senior staff compensation. The available reporting does not establish a direct effect on customers’ deposit rates, loan pricing or service charges. Any benefit to the wider business would depend on whether HSBC improves performance, retains capable staff and manages compensation costs effectively.
The next milestone is implementation of the reported January 2028 policy. Before then, the individual pay terms and performance framework will determine how much financial risk moves from the bank to its senior employees.
JBizNews Desk | London
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