HSBC moves to Wall Street bonus model, cuts fixed-pay deals

HSBC Holdings is transitioning away from fixed-pay allowances for senior staff and will increasingly distribute compensation in the form of bonuses, mirroring the Wall Street model. This change will take effect at the beginning of 2028, as per a memo obtained by Bloomberg News. The bank's spokesperson explained that this approach will enhance performance-based payment capabilities, facilitate differentiation, attract top talent, and recognize exceptional employees.

HSBC's shift aligns with similar updates made by Barclays, which announced in July that it would transition a larger portion of employee pay towards bonuses following Britain's 2025 changes to compensation rules. Wall Street bankers traditionally receive a larger share of their pay through performance-based bonuses rather than fixed salaries.

Fixed pay allowances were introduced over a decade ago by major British banks to supplement senior staff's base salaries after the EU capped financiers' compensation. These allowances, previously in the form of share awards subject to a retention period, now make up the largest portion of HSBC's bankers' compensation, as reported in the bank's 2025 annual report.

The UK rule changes have reduced the necessity for these fixed-pay allowances. HSBC spent $3.93 billion on variable pay in 2025, a 10% increase from the previous year, with gross compensation and benefits totaling $21.5 billion. The bank's restructuring, initiated by CEO Georges Elhedry since September 2024, includes business sales, closures, mergers, and job cuts.

Elhedry has also implemented cost-cutting measures, such as reducing long-standing benefits like education allowances and private club memberships for certain employees in Hong Kong.