Why big bonus deferrals could very good news for future graduates and MBAs

With bonus announcements delayed this year due to the metamorphosis of Goldman and Morgan Stanley into bank holding companies and the resulting postponement of their Q4 results, no one yet knows what shape 2009 bonuses will take.

However, it seems inevitable that a far higher proportion than usual will be deferred and that a far lower proportion than usual will be paid in cash.

To recap....

· The G20 recommended that at least 40% of bonuses should be deferred over three years, with 50% of the deferred element paid in stock. The proposal has been very enthusiastically adopted by the British government.

· Barclays Capital has said it will be "changing the narrative" of bonuses and deferring 60% this year, compared to 24% historically.

· Goldman Sachs plans to pay all 30 members of its management committee in restricted stock that can't be sold for five years, and is widely expected to increase deferrals for everyone else too.

· Morgan Stanley is said to be deferring 65% of compensation for its senior executives.

The result of all this is that with a higher proportion of bonuses deferred over long periods, bankers will be a) more tied in to existing employers and b) more difficult and expensive to move. This will be particularly so if, as some analysts are anticipating, banks' share prices rise dramatically over the next 18 months.

Mid-level hiring will suffer most

Headhunters say the revised pay structures are unlikely to make much difference at the senior end. This is because senior hires are strategically significant and will usually be done regardless of cost. Equally, long deferrals are nothing new at MD level and above - witness John Havens, Citigroup's head of investment banking, who earned $9m last year only $500k of which was in the form of cash.

Nor is the new look compensation likely to have an enormous impact on analyst and associate hiring. Pay at these levels is lower and less likely to be subject to long deferrals.

The biggest impact is therefore likely to be on VP and director level hires, where high comp, long deferrals and large salaries will conspire to drive up the future cost of recruitment.

According to the heads of recruitment at two banks in the City, this will result in less lateral hiring at these levels, and more emphasis on nurturing graduate and MBA talent in-house.

"There's going to be a stronger push on growing our own talent and retaining it long term," says the head of recruitment at one US bank in the City.

"Lateral hiring is going to be a lot more expensive and a lot more subject to regulatory scrutiny in future," says the head of graduate recruitment at a European bank. "The bigger emphasis will therefore be on the graduate and MBA piece."