Where in the world are bonuses highest? The answer is not what you think
Which global financial services centre should you situate yourself in if you work in banking and want to earn a big bonus? Surprisingly perhaps, the eFinancialCareers 2013 bonus survey suggests the answer is the City of London.
The average bonus in the UK was $98k (£58k) in 2013, according to survey respondents. This compares to an average of $72.9k in the U.S. and just $32.7k and $20.2k in Hong Kong and Singapore respectively.
2013 mean bonus levels for the US, UK, Hong Kong and Singapore in USD$
London’s results seem surprising given European Union restrictions on bonuses, but analysts say the big bonuses in the City are a reflection of its importance as a financial centre. “Banks have some of their highest paid people in London,” says Chris Wheeler, a director and banking analyst at Mediobanca. “It’s the hub for running not just the UK, but the whole of Europe and EMEA.”
The UK’s comparatively high global bonuses are undoubtedly helped by the fact that the country has a high proportion of highly paid front office, revenue generating staff. This is particularly the case for US banks operating in the country. Goldman Sachs, for example, paid its London based staff 70% more than its global average for 2012 (the most recent year for which comparative stats are currently available).
By comparison, bonuses in Asia look meagre. This is particular the case in Singapore. Bankers who want to move to Asia for money will be better off in Hong Kong.
Singapore’s low pay is partly a result of market structure. In Singapore, a traditional hot spot for operational functions, 42% of respondents to the survey said they work in the back office, while 57% of UK bankers who completed the survey said they hold front office jobs.
And yet, front-office folk in Singapore haven’t fared that well either. “Bonuses for excellent performers have been flat and those for normal performers have been significantly below the previous year,” says Farida Charania, chief executive officer, banking and finance, at Singapore-based search firm Nastrac Group.
Hong Kong’s bonus dominance over Singapore is reinforced by its larger pool of senior front-office bankers, who benefit from a bigger equity market and better access to mainland China. “The top deal-making bankers typically prefer to sit near their banks’ regional heads, who are themselves based in Hong Kong, hence Hong Kong receives a higher proportion of Asian bonuses,” says Nick Wells, a director at Hong Kong-based search firm Webber Chase.
The UK’s 45% higher rate of income tax takes some of the lustre off the country’s high bonuses. The highest rate of income tax in Hong Kong is just 17%. However, assuming that the entirety of bankers’ bonuses are taxed at the higher rate, our figures suggest that net UK average bonuses ($54k) still remain twice as high as the average post-tax bonus paid to Hong Kong finance staff ($27k). Maybe London bankers aren’t doing so badly after all.
Click on the thumbnails below to see global and local infographics for the eFinancialCareers bonus survey.