HSBC drops pay freeze plan after staff revolt

HSBC Holdings chief executive officer Stuart Gulliver cancelled 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 yesterday, 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 January 29 as part of HSBC’s drive to cut as much as $5bn 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 froze investment bank salaries this week and Barclays extended a freeze on hiring new staff indefinitely in December, while Credit Suisse Group and Deutsche Bank 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 authorised 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 yesterday’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 UK, people with knowledge of the decision said on Wednesday. The lender releases full-year earnings on February 22.
The shares fell 3.8% to 424.75 pence at 10:37am in London, extending losses this year to about 21%. They dropped 12% 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 January 29 memo. They were intended to remain until the end of the year and applied globally across all businesses.