HSBC plans to discontinue fixed-pay allowances for employees from January 2028, shifting its compensation structure towards greater reliance on performance-linked pay. The move follows regulatory changes in the UK that removed restrictions on how much bankers can receive in bonuses relative to their fixed salaries.
According to an internal memo seen by Reuters on Monday, the bank will phase out allowances paid to employees over and above their base salaries. Such payments typically cover specific expenses, including commuting costs.
HSBC said the change would not result in cuts to base salaries and would not alter its overall approach to total compensation. However, affected employees could see a larger proportion of their remuneration linked to variable pay, including bonuses.
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The bank said the revised structure would allow it to reward employee performance more effectively and differentiate compensation based on individual contributions.
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“As a global bank, adapting our approach in this way strengthens our ability to pay for performance, better differentiate, attract the best talent, and recognise those who deliver the best outcomes for our customers, clients and stakeholders,” an HSBC spokesperson informed Reuters.
The decision follows the UK's removal of the cap that had restricted variable pay to twice an employee's fixed remuneration. The previous 2:1 limit had constrained banks' ability to increase bonuses without raising fixed salaries or using other compensation arrangements.
With the restriction removed, financial institutions have greater flexibility to structure remuneration around performance. HSBC's planned changes reflect that shift, although the bank has said its overall compensation approach will remain unchanged.
The allowance changes are expected to take effect in January 2028, giving the bank time to implement the revised arrangements. While base salaries will remain protected, the greater role of variable compensation could make some employees' total earnings more dependent on performance and bonus outcomes.
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HSBC Plans Major Job Cuts In UK Wealth Business
The pay restructuring comes as HSBC pursues a broader push to improve efficiency and expand the use of artificial intelligence (AI).
The bank is planning substantial job cuts in its UK wealth management business, including reductions of around 70% in financial adviser roles and about half of management and specialist positions.
The proposed changes were still under consultation, according to the report.
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