Banks will pay price if staff pay cut

The Mercer report on bankers’ pay has drawn an unfortunately all-too-predictable reaction from those who are often happier taking easy pot shots at bankers than engaging in meaningful debate. Yet, if we want a banking sector which is fit for purpose, we need to look beyond the easy sound bites to the context of what is actually being proposed.

First, let’s address the issue that Irish bankers are somehow overpaid. We at Hays work with most of the domestic and international banks based in Ireland. We also work with almost all of the major banks in most of the world’s developed economies.

When we look to recruit for senior positions in Irish banks we also look abroad; and we are not helped by the fact, confirmed by Mercer, that senior Irish bankers are paid considerably less than their European counterparts.

Headlines stating that Irish banking staff are paid more now than in 2008 deliberately choose to distort the picture by looking only at core pay. The average overall salary for a bank worker in a large Irish institution has fallen from around €68,000 to about €61,000 in the space of the last four years. That’s a drop of nearly 12%. At executive level, overall pay has fallen even more dramatically, by as much as 64%. To state that banking executives are still overpaid, begs the question, compared to what? Salary levels at management and executive level in Irish banks still lag well behind UK and European averages.

The “bank bashers” will respond by asserting that bankers should be treated like public sector workers. This conveniently ignores the fact that Irish banking staff do not enjoy immunity from forced redundancies.

In the four organisations covered in the report, some 6,000+ jobs have been lost since 2008. The estimate is as much as 10,000 for the sector as a whole. The public sector argument also fails to recognise there is a real demand for many of the staff within the State-supported banks. Any further significant reductions could encourage this mobile workforce to take their transferable skills elsewhere. A bank bereft of money is bad enough; to be bereft of the talent as well is a far worse proposition.

This is not to say that banks do not need to reduce their costs. They do. I suspect nobody is more motivated to see the banks return to profitability than the banks themselves.

It is not just about salary levels. It is about leaving aside a righteous anger and moving on. It is about recognising that bankers are an essential part of the solution to our country’s woes and affording them the respect which goes with that recognition.

Two of the big issues for Ireland at present are small business lending and dealing with distressed debt. The common thread of both is the need for well-qualified employees in sufficient numbers to address the often complex issues involved.

Mr Noonan reminds bankers that without the Government bailout they would not still exist. This is, I would respectfully suggest, missing the point.

We invested tens of billions in bailing out the banks, not in an attempt to be nice to bankers but because a working banking system is essential to our economy.

Having invested so much in one sector we must now seek to get a return on that investment, not seek short-term political gain at the expense of mid-tier bank workers.

*Richard Eardley is managing director of Hays Ireland.