Bonuses may have been hammered down this year, but – after significant pay rises in 2010 – base salaries have largely remained stable. However, there are signs that financial services employers are less generous when taking on new staff, which could see salaries slide in the longer term.

The dangers of increased fixed costs within an industry traditionally reliant on paying out the majority of compensation expenses in bonuses are obvious – if the bonus pool can’t be reduced, the chances are that headcount will be slashed instead. This was in evidence last year, with many firms cutting staff from September, rather than simply reducing compensation costs in the fourth quarter.

Goldman Sachs was the only investment bank to officially reduce salaries last year due to a clause in its employment contracts. It hiked base pay up by 50-100% in 2009 to compensate for a reduction in bonuses, but invoked a contract clause last August to bring salaries back down again. Despite rumours that other banks are following suit, there’s been no confirmation of this.

There are signs that financial services firms are trying to reduce salary costs, however. We’ve just completed our annual salary and compensation survey, which received around 1,750 responses and although just 3% of respondents said they’d received a decrease in salary, 44% said they’d taken a pay cut because of switching companies.

This suggests financial services firms are increasingly unwilling to match previous salaries for new recruits. Recruiters tell us that this isn’t the case for candidates switching between companies, but if someone is on the job market and looking for a new position, they probably have to accept a pay cut.

“If somebody is out of work and secures a new role, it’s very likely that they will be offered a reduction on their previous salary,” says Ben Cowan, director of recruiters Astbury Marsden. “Clients are benchmarking pay against the market, rather than a candidate’s previous salary, which means a lot of people are earning less than in their previous role. People moving between companies are still largely doing so for an increase in salary or a promotional opportunity.”

Our figures suggest that firms are still largely willing to offer pay rises to their current employees. Nearly 50% of people responding to our survey said they’d received a salary increase this year. However, in our 2010 survey, 60% said they’d received an uplift, which suggests that pay rises are now less common. And just 18% of those receiving a salary increase did so by moving organisations. Instead the largest proportion (40%) said they’d achieved a pay rise because of “personal performance”.

“It’s very much a buyer’s market in the City currently, and financial services firms are taking advantage of this in some cases when taking on new recruits,” says Simon Lindrea, regional director at Michael Page Financial Services. “There’s not a wholesale reduction in base salaries, but securing an increase when switching jobs is more of a challenge currently.”

The survey covers a lot of ground, but some of the more interesting conclusions can be accessed by clicking on the links below:

Risk and compliance compensation is in decline

FICC pay is falling, but it still pays the biggest bonuses

Taking a Masters degree is worth it

Compensation:

Bank-by-bank these are the most competitive compensation structures  

Frustration at wealth managers, flagging pay in fund management and big bonuses at hedge funds

Q&A: Peter Milne, director of financial services recruitment at Robert Walters

Bad back office bonuses have left UK employees demoralised, but do cost-cutting banks really care?