Everything you need to know about how the FSA plans to limit your bonus

In case you missed it, the FSA has finally released its Code of practice on remuneration policies. Although the regulator makes it very clear that it has no intention of setting the actual levels of remuneration (this is a 'matter for firms' boards'), it's going to make a big difference in other ways. Here's why:

· No more keeping up with the Joneses: 'Industry comparators should be a secondary rather than a primary factor in the determination of remuneration policies.' [Not good news for the likes of McLagan. ]

· You need to be able to live off your base salary: 'The fixed component of remuneration should be a sufficiently high proportion of total remuneration to allow the company to operate a fully flexible bonus policy.'

· A very large proportion of your bonus will be deferred: 'The major part of any bonus which is a significant proportion of the fixed component should be deferred, with a minimum vesting period....an example of good practice would be that where a bonus is a significant proportion of the fixed component, the proportion to be deferred should be not less than two-thirds.'

· It's all about divisional rather than individual or team performance: 'Linkage to the future performance of a business unit or division is usually preferable to the future performance of a smaller departments or teams since the latter arrangement can be less effective in promoting teamwork.'

· Risk and compliance will dictate your pay: 'Risk and compliance functions (in consultation with the firm's HR function as may be deemed appropriate) should have significant [our emphasis] input into setting compensation for business areas.'

· You will not be able to dictate pay for risk and compliance : Risk and compliance staff must have their own bonus pools, based on their own objectives.

And finally...

· Bonus assessments to be based on profits [truly shocking]....

· Bonus assessments should also take into account the cost of capital and the amount of liquidity required to generate those profits.

· Bonuses to be based on performance in more than one year.