Bonus payout outlook: Guest comment

Too early to start thinking about your coming bonus? James Lloyd-Townshend, managing director at recruiter Hays Banking, thinks not. Here's his take on what you should expect.

High-flying bankers should be raking it in when bonuses are paid out in 2007. Earlier this year payouts were high, but we are expecting past figures to be smashed in the coming bonus rounds.

Candidates' total compensation expectations are substantially higher than they have been in recent history at all levels. This is due to the amount of fees the banks have generated for the first six months of 2006. Consequently sign-on bonuses at all levels are now much more prevalent.

Quantifying the current state of play, the top 10% of investment bankers at director level and above are receiving significant guaranteed bonuses, some over a three-year period. Guaranteed bonuses and sign-ons have hit and exceeded 300% of basic salary.

Hot spots at the moment include M&A, structured finance, proprietary trading and relationship management roles. Even junior staff are seeing guaranteed bonuses written into their contracts, whereas historically this has not been the norm.

Candidates are now starting to sit tight for their 2007 payouts, so the structure of packages offered to them is crucial. Particularly at this time of year, banks have to realise that if they want to attract the rainmakers to their firms, they will not only be paying a premium in salary but will be buying out their 2007 bonuses as well.

That said, a lot of companies have already hit their budgets for the financial year, and so expectation levels amongst bankers is extremely high. At the moment we're undergoing an increase not only in candidates receiving buyout bonuses from their current bonus cycle, but also in some circumstances, compensation for deferred bonuses and existing share options. These are increasingly becoming "must haves" within the compensation structure of successful offers.

From a job seeking perspective, there has never been a better time to move. Even if you are not actively looking for a change of position at the present time, there is no harm in knowing what your current market value is. It is always flattering to know you are in demand and there has never been a better time to look towards the future and manage your next career step.

It is not all sweetness and light, however. The demand and supply pendulum will start to swing back the other way. Over time the headhunting calls will dry up, and with it the number of available positions that will appeal to you. Our advice is to use this time wisely. Reposition yourself in the marketplace now ahead of the lean times. As the rock group Oasis once said, don't look back in anger.

The City is now in payback mode. For those individuals who went through the recent drought of the early 2000s where salary increases were low (if you received one at all), this is the time to get what you deserve. Enjoy it - and more importantly, make the most of it before the market begins to dry up again.