Mercer, the consultancy, says its global survey of pay trends in the financial industry does not point to a big set of increases.

Executives and other professionals in the world’s financial services sector haven’t enjoyed dramatic rises in base salaries, defying some expectations, at least according to projected rises for this year, a new study by consultants Mercer shows. However, there are signs of robust pay growth in private banking.

Projected base salary increases for 2015 remain modest, running on average between 2.3 to 3.2 per cent. Regionally, 2015 salary increases are expected to be between 5 per cent and 8 per cent in emerging markets, 2 per cent and 3 per cent in North America, and 1.5 per cent and 2 per cent in Europe.

The figures counter the image of bankers enjoying high pay rises regardless of economic conditions, although recent anecdotal evidence suggests that in some fields, such as compliance, salary growth has been strong as regulatory demands on financial services have risen.

The latest data comes in the tenth edition of Mercer’s Global Financial Services Executive Compensation Snapshot Survey, which was conducted in November 2014 with responses from 63 global financial institutions. Of the respondents, 49 per cent were banks, 37 per cent insurance firms, and 14 per cent were other financial services organisations (such as investment and asset management, credit cards, stock exchange). Survey participants are based in 18 countries with 47 per cent in Europe, 37 per cent in North America, and 16 per cent in emerging markets (which combine Asia and Latin and South America).

“The weighting of base pay compared to other forms of pay within financial services has increased. However, the magnitude of base pay increases planned is less than expected," said Vicki Elliott, senior partner at Mercer.

Forecasted base salary increases (including salary freezes) in 2015 will be modest, averaging 2.3 – 3.2 per cent for all executives and 2.3 per cent for senior corporate management.

The banking industry is generally projecting lower salary increases than the insurance industry. Most organisations expect average employee pay in 2015 to be similar to 2014 although expectations in Europe and emerging markets are more positive than in North America. There is divergence within the sector too, with more than a quarter of insurance firms expecting average employee compensation to rise, while the majority of banks (85 per cent) expect it to remain fairly stable.

Annual incentives
Around 60 per cent of companies predict 2015 annual incentive levels will be similar to 2014 although 20 per cent expect levels to increase from last year. Increases are mostly expected in private banking, private equity, investment banking, and property and casualty insurance roles.

In contrast, incentives are expected to be lower in fixed-income and staff positions. Over two-thirds of the organisations are not planning to change their target annual incentive levels for 2015 although at least 15 per cent are planning to increase levels in their private banking, commercial banking, equities and investment banking businesses.

While most companies are not planning to make changes to their incentive design in 2015, 25 per cent of banks plan to increase the weight of non-financial metrics in their annual incentive plans.

“Increasing numbers of banks are measuring customer satisfaction, employee engagement, quality of risk management and other performance areas that are not financial,” said Dirk Vink, senior compensation consultant and survey manager at Mercer.

Mandatory deferrals and clawbacks
Most banks and two-thirds of insurance firms have mandatory deferral programmes already in place. Over 25 per cent of North American organisations plan to increase the use of clawback (after vesting) and nearly 14 per cent plan to increase the use of malus in 2015, further strengthening their ability to respond to problems that surface over many years.

Role-based allowances
Over 40 per cent of banking organisations have role-based allowances in place for 2014 and an additional 10 per cent - particularly those in North America - are planning to introduce them soon. Role-based allowances are not common outside the banking industry.

Following the publication of the EBA Opinion Report, which found that role-based allowances may be considered variable pay (and consequently subject to the so-called bonus cap), very few organisations that implemented role-based allowances are now planning to eliminate them.