HSBC scraps pay freeze after outcry from staff


Two weeks after announcing a pay freeze across its 266,000-strong global workforce, the bank sent a memo to staff reversing the policy, saying that there would be salary rises this year. These will be paid by using the bonus pool for this year.

The memo precedes a board meeting on Sunday, when the directors will discuss whether the bank will move its headquarters to its historical home of Hong Kong or stay in London. The bank will announce its decision late that day if the deliberations yield a unanimous result.

HSBC is expected to remain in London but may reaffirm its long-term commitment to Asia, which accounts for nearly 40 per cent of its revenues.

As part of its domicile review, HSBC considered moving some senior staff, such as Noel Quinn, global head of commercial banking, to Hong Kong but is not expected to do so at this point.

Observers have wondered whether, after ten months of reckoning, the bank may still keep the door open until Britain has voted on whether to leave the European Union in a referendum expected to take place on June 23.

HSBC has said that it favours Britain remaining in the EU but has decided that the issue is not central to the decision about its headquarters.

Stuart Gulliver, the chief executive, decided on the pay freeze U-turn after staff protested, having already been told by managers how much their pay rises would be this year.

“We will therefore proceed with the pay rises as originally proposed by managers as part of the 2015 pay review, noting that, consistent with prior years, not all staff will receive a pay rise,” Mr Gulliver said. A hiring freeze announced two weeks ago will remain.

Mr Gulliver highlighted the tough economic conditions caused by falling oil prices and slowing Chinese growth as the bank prepares to be the first big UK lender to report results, on February 22. “These macroeconomic pressures mean we must be cautious and realistic about the outlook for our revenues in 2016,” he said.

HSBC has laid out plans to identify annual cost savings of up to $5 billion by 2017. However, it is under pressure to cut costs more rapidly, particularly when global interest rates are set to stay at close to zero or in negative territory for longer. A decision to stay headquartered in London may prompt a challenge from Asian shareholders, who, according to Mr Gulliver, expressed annoyance last year that remaining in the UK and being subject to a raft of new regulations might threaten HSBC’s progressive dividend policy.

Since then, the government has made various concessions to keep HSBC, which has been based in Britain since its 1992 acquisition of Midland Bank. These have included cutting the unpopular levy on bank balance sheets and watering down rules for senior managers.