HSBC plans to phase out fixed-pay allowances for affected employees from January 2028, changing the balance between guaranteed and performance-linked remuneration after the removal of the UK’s former cap on bankers’ bonuses.
The move was disclosed in an internal memorandum reported by Reuters. HSBC does not intend to reduce base salaries as part of the change, but the arrangements would allow a greater proportion of overall compensation to be paid through variable awards where applicable. The precise effect on individual employees will depend on their contracts and the bank’s remuneration policies.
Fixed-pay allowances became a feature of compensation at some banks when European rules limited bonuses to a maximum multiple of fixed pay. Institutions used additional fixed elements to retain competitive remuneration packages for senior staff and employees whose roles carried material risk-taking responsibilities.
The UK removed the bonus cap in 2023, giving banks more flexibility to determine the balance of fixed and variable pay. The regulatory change did not remove wider requirements for prudent remuneration, including provisions intended to discourage excessive risk-taking. Banks remain responsible for designing systems that link rewards to performance without undermining financial stability.
Removing fixed-pay allowances would increase the proportion of remuneration that depends on performance and other conditions. HSBC says the change is intended to help reward individual contributions and business results, but the outcome for affected employees will depend on the replacement arrangements and how they are operated from 2028.
The distinction between salary, allowances and bonuses matters for employees. Guaranteed pay provides certainty regardless of short-term trading conditions, while variable remuneration can rise or fall according to individual, business-unit and group performance. Changes in the mix affect the predictability of earnings even when a company intends to maintain competitive total compensation opportunities.
Variable remuneration can make some staff costs more responsive to financial performance, particularly in operations where fees and trading revenue fluctuate. Pay structures also need to avoid encouraging decisions that deliver short-term earnings at the expense of longer-term risk, a longstanding concern in banking regulation.
The move follows HSBC’s wider reorganisation under chief executive Georges Elhedery, who has been reshaping the international bank’s operations and management structure. A remuneration change does not itself establish the success of that strategy, but it is consistent with efforts to simplify arrangements and align staff incentives with the bank’s chosen performance measures.
Other international banks have revisited compensation structures after the UK cap was removed. Competition for experienced professionals remains a factor, particularly for organisations recruiting across London, continental Europe, New York and Asia. Different national rules can complicate how an international group maintains consistency across its workforce.
Governance scrutiny is likely to centre on how awards are assessed, deferred and adjusted when risks emerge after a profitable period. A system that increases the proportion of variable compensation can create stronger incentives for performance, but it requires equally credible safeguards against rewards based on short-lived results or inappropriate conduct.
Investors will also look at whether remuneration policy supports cost control, retention and the delivery of strategic objectives. Employees, meanwhile, will assess the change in terms of the reliability and potential value of future earnings. The bank has given notice well ahead of January 2028, leaving time for the arrangements and their individual implications to be clarified.
The announcement reflects a wider adjustment in UK banking remuneration after regulatory reform. It does not amount to a general cut in HSBC salaries, but it signals that pay for some roles will become more closely tied to outcomes and the bank’s judgment of performance.
The transition gives employees time to understand how guaranteed and performance-linked components will be calculated. Even where an employer intends to preserve the potential total value of a package, the range of possible annual outcomes may change. The way HSBC sets performance measures and communicates them will influence the reception of its new approach.
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