Employee rewards watch: financial services sector UK 2014

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It has now been more than five years since the global banking crisis erupted. Since governments, regulators and society unleashed the full weight of their discontent on the Financial Services sector.

There has now been time to protect, stabilise and investigate. But the future of Financial Services we see today is not one that we may have predicted a few years ago.

Leverage has reduced and the banking system is arguably safer than before. Yet no longer is it just a case of surviving the regulatory onslaught, returning to globalisation and the unimpaired flow of crossborder capital.

The crisis brought a stark realisation that countries cannot function without control over their financial markets. National containment and protection must be prioritised over top-line growth.

This has led to major policy and regulatory reforms. These reforms serve the specific and very different interests of each country. The Glass-Steagall Act appears increasingly relevant. Yet these reforms counter the economics of global scale upon which the largest Financial Services businesses have been built and still depend.

The ONS report that the industry now contributes 10% less to UK GDP than it did at the start of the recovery. The spectre of huge regulatory penalties continues to loom. Even so, respondents to the survey appear optimistic for financial performance in the year ahead.

As these new policies take hold, many will have no choice but to divest interests, rationalise products and focus on better understanding local markets.

No longer will size be the dominant force. As Charles Darwin famously observed, it will be those who can best manage change who survive.

The industry now employs 56,000 fewer than in 2009. Yet our results show that over half the respondents expect growth in headcount over the year ahead. This suggests a significant investment in new strategies.

Misalignment of interests provided the political imperative to drive fundamental changes in culture and behaviour. Scandals, such as LIBOR and FX, compounded this. Regulators are now pursuing core themes, putting the end customer first. These are reshaping all industry sectors, not just banking.

These major changes in culture are now driving Financial Services organisations to better understand and manage their talent. This requires re-evaluating the competencies and incentives needed for them to rebuild stakeholder trust. They are also expected to deliver sustainable, if not boring, performance.

This year almost half of respondents in the sector expect to give role-by-role increases to pay. This is twice that in 2013, suggesting that many are already rebalancing financial incentives.

However, such radical changes cannot be achieved quickly. Nor without significant uncertainty, pressure and upheaval amongst employees. This is reflected by increasing levels of absence in this year’s survey.

In summary, we expect that 2014 will continue to place considerable demands on HR professionals in the sector. They will need to modify reward packages to meet new strategic demands. This will require a greater focus on efficient administration and communications.

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