In his recent presentation to analysts, William Chalmers, Chief Finance Officer, said on Group Profit Share (GPS) that: “We do want to recognise colleagues, given the fact that we paid no bonus last year, we want to recognise to colleagues that things are proceeding in a better way than we had expected and therefore it is appropriate to enable our colleagues to share in that performance”. Mr Chalmers said that it expected 2021 operating costs to increase from £7.5 billion to £7.6 billion and the increase in that guidance “takes into account the variable pay adjustment”. And Mr Chalmers also alluded to a bumper bonus year by accepting that “much of the increase in variable pay is actually already in the £7.5 billion guidance”. So, from a GPS perspective, the bank’s half-year results were better than expected and if Mr Chalmers is to be believed, and there is no disaster between now and the end of the year, the bonus pool the bank budgeted for at the beginning of the year is now £100 million bigger.
One of the bank’s in-house staff unions, Accord, is trying to give the impression that there is going to be no award paid in March 2022 and that only because of its herculean efforts will GPS bonuses be paid out. It’s a load of rubbish and it’s trying to deflect attention away from its disastrous approach to basic pay. Asking for something that you know is going to happen anyway is the oldest trick in the book. Members should remember that whilst bonuses are welcome, it is basic salary increases that are important because those have knock-on effects for other benefits.
It’s Underlying Profit, Stupid
Last year there was no award paid out despite the fact that Lloyds made a statutory profit before tax of £1.4bn. And that was at a time when even the likes of TSB – which made a loss of £205 million – paid out bonuses worth 3.9% of salary. Most of the major banks paid out something but Lloyds wouldn’t budge. Although it did manage to make sure that its top 560 executives could trouser up to £75 million in share options between them.
The key figure when it comes to the Group Performance Share award is the underlying profit for the year. The threshold for paying out the award is set at 20% below the Group’s target for the year. The starting point for the bonus pool – which is the amount of money the bank will spend on bonuses – starts at 5% of the underlying profit. The problem is that staff are never told the target and it’s only announced retrospectively when the 2021 Annual report is published. Last year the underlying profit target for 2020 was £5.7bn, which staff only learned about when told they’d be getting no bonuses – a sure fire way of allowing the Bank to manipulate payouts. The underlying profit for the half-year to June 2021 was £4bn. According to the Q1 2021 Consensus forecast published by Lloyds – which is the average forecasts received by LBG from analysts covering the Group – the underlying profit for the year will be £4.9bn, which seems a little conservative given the performance to date. However, the interim Chief Executive, William Chalmers, said that the second half of the year would be “solid but not as strong as in the first half”.
The bank should publish its underlying profit target now so that staff can see how the business is doing against this key metric. Whilst it looks like it is going to be a bumper year for bonuses, members shouldn’t lose sight of fact that it’s increases to basic pay that are important.
Worst Pay Deal On Record
Before the pay negotiations for 2021 began, BTU warned that inflation was going to increase, and all the unions needed to take that into account if members weren’t going to lose out.
That warning was ignored and the in-house, bank supported staff unions signed the worst pay deal in the finance sector.
The average member of Lloyds staff got a pay increase of just 1%. Inflation is currently running at 3.8%, the highest level for 3 years. And, despite the dip in July, inflation is set to carry on increasing over the new few months according to most economists. That means every member of staff in Lloyds is financially worse off because of Accord’s agreement with the bank.
And if you don’t believe us, this is what Accord said a few weeks about the deal they reached with Lloyds: “Accord signed an agreement to implement the proposals with effect from 1 April but, with rising inflation…. virtually everybody in LBG will experience a fall in the real value of their salaries this year.”
Trade unions shouldn’t be reaching agreements that result in their members being worse off. And it’s important that Accord and Unite don’t try to use bonus payments to offset a rubbish pay deal.
Members with any questions on this Newsletter can contact the Union’s Advice Team on 01234 262868 (Chose Option 1).