British companies have ratcheted up their employees' basic salaries, after 93% of financial firms revealed that they are worried about losing top staff, as European Union's rules over bumper bonuses come into force next year.
According to a survey by recruitment firm Robert Half, nearly two thirds of financial companies have significantly increased basic salaries in a bid to tackle bonus caps, which were set out by the EU Council earlier this year.
Over nine out of ten financial firms said they were concerned over an exodus of talent while 65% of these companies said they have bumped up basic salaries to retain staff.
Basic salaries have increased by 20% on average as a result, says the survey.
The EU's plan caps bankers' bonuses at a maximum of double their salary from 2015 but the measure will come into force for 2014's bonuses. The new set of regulation will also include a basic salary threshold of €500,000.
Banks and Financials Fight Bonus Caps
Since the EU installed new rules over bankers' bonuses, a raft of surveys and industry expert reports have revealed that banks and other firms have increased salary pools.
In June this year, a prominent employment partner at law firm Pinsent Masons revealed that banks are stuck between having to overhaul remuneration procedures by a certain deadline, but without concrete rules, this is likely to result in across-the-board increases in salary.
"This European Union Council vote in favour of the bonus cap is no surprise and at least the banks have a clear timetable for reforming their bonus structures," said Christopher Mordue.
"The problem is that there are still some significant uncertainties about how the cap will work and who will be caught by it. Firms now face the difficult task of overhauling their remuneration practices in a short timescale without a clear picture of the final shape of the new rules.
"This is likely to result in broad brush compliance approaches, including increasing salary to mitigate the impact of the cap."
UK Follows EU Bonus Crackdown
Meanwhile, the Parliamentary Commission on Banking Standards urged the British government to create new laws to imprison more "reckless" bankers, while also making it easier to claw back bonuses and pensions in order to clean up the industry.
In its 500-page report, the PCBS recommended that Whitehall should consider deferring bonuses for 10 years, in order to prevent reckless behaviour.