In line with the Programme for Government commitment and the public interest in the matter, the Government has today (12th March 2013) decided to publish the Mercer Review of Remuneration Practices and Frameworks at the Covered Institutions. Following a consideration of the review the Government has decided to direct the banks to come up with plans to deliver savings of 6% - 10% of total remuneration costs, through reductions in payroll and pension benefits, new working arrangements and structures that deliver efficiency gains.
Commenting on the publication the Minister for Finance Michael Noonan stated:
“I wish to thank Mercer for undertaking this assignment and the banks for their co-operation in its preparation. We now have the factual position on bankers’ remuneration from end 2008 to late 2012 placed in context and this will enable a true evidenced based policy to be developed and implemented in consultation with the various stakeholders.”
The Minister set out that the high level statistical findings of the Mercer Review show:
A significant reduction in total remuneration costs at bank level between end 2008 and late 2012, mainly due to reduced headcount and the withdrawal of incentives (bonuses).
Average total remuneration for continuing employees has fallen by a range of 6% to 11% at Bank of Ireland, Allied Irish Banks, and Permanent TSB but it had risen 1% at IBRC.
The comparison element of the Mercer Review shows:
Senior Executive level (and above) salaries are generally behind the market as compared to quoted Irish companies and Mercer European Financial Services survey and significantly behind when incentives are taken into account
Management level salaries are in line with the Irish financial services market but somewhat ahead of ‘Other Industry’. Total remuneration for this cadre of employees is somewhat behind the Irish financial services market while ahead of ‘Other Industry’.
Lower to middle level grades salaries are typically in line with the financial services market and somewhat ahead of ‘Other Industry’.
In commenting on the Review, the Minister stated:
“The Mercer Review illustrates that remuneration levels in the Covered institutions are somewhat behind levels in the financial services industry generally, with variations to these broad trends at different levels in the banks.
However, the Government has taken the decision that with the remaining Covered Institutions still incurring losses it was an inescapable conclusion that the cost base of the institutions needs to be reduced further. This is essential if they are to return to profitability, be in a position to support the economy and repay the State’s investment through a return to private ownership.
It can never be forgotten by management and employees of these banks – both past and present – that without enormous cost to Irish taxpayers these institutions would not have survived and that this needs to be borne in mind during future discussions. I acknowledge that the sacrifices and changes made by bank employees to date at all levels and recognise that this has been achieved without major industrial unrest in what is a critically important sector.
In terms of next steps, I, on behalf of the Government, will be directing the banks to come up with plans as to how they intend to address this issue in a manner that can help meet the State’s objectives. I expect the value of those plans to mean a saving of 6% - 10% of total remuneration costs, through reductions in payroll and pension benefits, new working arrangements and structures that deliver efficiency gains. The Government is anxious that matters proceed forthwith and in a spirit of co-operation in light of Ireland’s ongoing challenges. In the event that this is not forthcoming or possible the Government will have to consider other options and measures that will achieve its aims.
The announcement of the ending of the Bank Guarantee last month and this direction to improve the cost bases of the banks are important elements of the Government’s comprehensive strategy to enhance the value of the State’s shareholdings in the banking sector so they will yield a significant return to the taxpayer.”