Lunchtime Links: Be aware that the FSA will suddenly be able to reclassify you as Code staff and require you pay back your cash bonus

A new report, out today from Mercer, reveals why you probably do not want to be a member of Code staff at an investment bank in London. Mercer reveals that 33% of EMEA-based code staff are probably having their salaries frozen this year (vs 0% in Asia Pac and 10% in the US). And although 67% of EMEA code staff are in line for a salary increase, Mercer predicts this will be minimal: they can expect a rise of just 2.8%.

Worse - and not touched upon by the Mercer survey - is the fact that the FSA is currently in the middle of reviewing the enhanced remuneration disclosures made by banks in London for 2011. As a result of this review, lawyers are warning that some individuals not currently classified as code staff could find themselves suddenly placed into this category by the regulator.

Compensation for code staff must adhere to European rules stating that 40-60% of bonuses must be deferred over three years and that half of the remaining cash bonus must be deferred for around 6 months. The danger, therefore, is that if you received a large cash bonus and are subsequently deemed to be code staff, you may need to pay some of it back.

"The FSA would indicate to a bank that it had paid out a bonus in breach of the Remuneration Code and the bank would then need to take action to recover those bonuses that have wrongfully been paid out," says Colin Smith, a solicitor at Withers. "Because most banks have provided for this in their contracts

as part of the conditions on which bonus is paid, individuals will have little choice but to repay it. There is then a difficult position if the individual has paid tax on that bonus - it is likely that the will individual may have to repay the gross amount and they could be unable to recover the tax they have paid from HMRC."

Smith says some banks are applying the rules governing code staff very strictly. Others aren’t and could be caught out.

It’s unclear when the FSA’s review will be over. In the meantime, if you’re concerned that your employer may have been a little lax with its definition of code staff, we have information on who’s supposed to fall into the category here. 

Meanwhile:

Former Morgan Stanley trader turned novelist is on the Orange Prize longlist. (Telegraph)  

A Singapore-based brokerage backed by Carlyle is closing and cutting 11 jobs. (Bloomberg)

I interviewed Alex Hope. Either he is one of the greatest talents ever seen in the City or a fantasist. (LondonLovesBusiness) 

In one graduate interview with a major investment bank, he was asked what department he would like to join to make the role more interesting for him. (Telegraph) 

How to completely and utterly destroy an employee’s work life. (Washington Post)