As accountants know, Q1 typically sees banks make a reduction in their headcount ahead of bonus payments. The Covid-19 pandemic brought forward the annual cull and cast doubt over the bonuses payable this year. As investment banks are bullishly asserting substantial bonuses in the press, how do you respond to the pressure to reward high achievers, when there are capital requirements and staff reductions? What are the legal risks of substantially reducing your employees’ total compensation?

Caution required

Bankers will usually have one of two rights to bonus, both of which require different approaches this year.