Generous bonuses filter up

Rising bonuses for investment banking analysts and associates could be good news for people above them in the hierarchy.

Unlike most investment banking employees, who have to hold out until the end of the year for bonus announcements, analysts and associates are typically told how much they've earned in July. By all accounts, they have been handsomely rewarded. And that suggests everyone else should be too.

"Now that analysts and associates are being paid up, we'll need to increase rewards for vice presidents too," complains the head of compensation and benefits at one US bank. "It's a question of maintaining differentials. You can't increase bonuses for type of employee without doing the same for others."

Last month a spreadsheet of indeterminate origin suggested first year analysts at the likes of Goldman Sachs, Merrill Lynch and Morgan Stanley, were on track to receive bonuses equivalent to 100% of base pay, bringing total compensation to a distinctly generous 96,000.

Recruiters dismissed the figures at the time as being an exaggeration, but now say the reality may not be too far off. "Bonuses for analysts are dramatically higher," says Jim Nairn, a consultant at recruitment firm the Cornell Partnership. "The whole cultural attitude towards them has changed - the need for people to execute M&A deals is so great that they are no longer seen as expendable."

Promotional prospects are also promising. Nairn says most third year analysts are now making it through to become first year associates. And those who don't are being kept on as analysts - in the past they would have been swiftly shown the door.