MIDDLE EAST MOLE: Got a small bonus? Your boss is trying to tell you something

Bankers in the Middle East have every right to feel slightly aggrieved - if the 2010 bonus payments are anything to go by, your employer thinks you're worth roughly the same as last year.

This isn't completely clear cut, however. Your individual performance would have impacted your bonus this year (as opposed to be materially down across-the-board in 2009), as banks look to separate the wheat from the chaff. If your bonus was small, your employer is trying to tell you something.

But regardless of how good you are, and the size of your year-end payout, the chances are that you will have to wait a few years before getting your hands on a substantial chunk of it. What's more, there's large gulf in terms of pay and structure of this between local and international institutions.

How big is the bonus pot?

The chatter in the DIFC, Abu Dhabi and the QFC is focused on one thing - who got what where. Regardless of whether the region's banking sector has turned a corner, the numbers speak for themselves: bonus pools at international banks have not changed much over last year given the mixed results at banks.

On average, slightly increased revenues were brought down by increased staff costs, which were incurred largely at the beginning of the year in anticipation of the ever-elusive turnaround. Regional banks' bottom lines seem to have increased, though largely through rises in net interest-income and reduced costs rather than an increase in investment banking or advisory functions.

Top performers are rewarded, at the expense of mediocre guys

Flat bonus pools and increased headcounts means one thing: lower per capita compensation. As confirmed by several heads of banking teams, for every banker that got a 20-40% increase, there are 2-3 disgruntled average performers down 10-20%. It is very much a case of the 80/20 rule - 80% of the revenues are made by 20% of the individuals, and bosses want to reflect this in pay.

Shifting compensation structure

At international firms, the bonus is now a much smaller piece of the pay pie, making it harder to differentiate the stars from the underperformers. Therefore, for those whose bonuses are down, the impact in hard numbers is less painful than a few years back. Most of these guys are quietly grateful to have missed the latest round of redundancies whilst receiving a bonus.

On this point, regional banks are at a significant disadvantage, as their salary structure remains largely unchanged from the past few years.

Finally, the impact of deferrals at international banks is less than feared, with approximately 30-40% of bonuses paid in cash or restricted stock over three years, versus the feared 50-75% over 3-5 years.

Broadly, if you got more than last year you are doing very well. If you got roughly the same, don't complain. If you got a fair amount less, you are not wanted and are first out if the market does not pick up soon, so consider yourself lucky you are still there and do not spend your money on a Porsche 911.

Anyway, if you're smart you should have been squirreling away you comparatively hefty salary for the coming rainy days. If you are at a local bank, your salary will be smaller, but you're less likely to get fired. Either way be prepared, unless the market materially improves over the coming months, redundancies cannot be too far away.

Jamal Bahir (a pseudonym) is seasoned senior private equity and investment management industry veteran based in the Middle East and Europe. He is an advisor to several ruling and trading families from the Middle East, as well as select European governments and private equity funds, advising on their investment, financial and regional political strategy. The author may be reached on jamal.bahir@gmail.com.