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Are bonuses now bigger than pay rises?

The pre-recession bonus culture has returned with pay-outs rising to £40.5bn across Britain this year – marking a 4.9 per cent increase from the 2013 financial year. Not since before the recession (which author Andrew Smithers blames on bonuses in the first place) have bonuses made up such a large proportion of the average employee’s pay package.


Key sectors behind the biggest bonuses  

According to recruitment firm Hays, falling real-term wages in many fields are concealing substantial remuneration offers. The biggest bonus providers were banks and insurers, who collectively offered their employees £14.4bn. Across financial services, the average individual bonus was £13,300 – up from £700 compared to last April.

The mining and oil industry also relied heavily on bonuses as a way of rewarding staff. They offer an average of £7,000 per person – which is actually down £300 from 2013, but still puts them second in the running for biggest bonuses. Meanwhile, bottom of the list is education, health and social work service providers, whose bonus payouts the Office for National Statistics describes as “negligible”.

There are also significant differences between private and public sector payouts, with private firms paying 5.8 per cent more in 2014 bonuses, while public sector companies slashed bonuses significantly, by 16.3 per cent. On average, a private sector employee could expect to take home just over £1,800 in annual bonuses, while public sector workers came away with substantially less at just below £300. Of course, we have to put this surprising statistic into context, as the Royal Mail’s privatisation in October removed some of the biggest bonuses from the public sector picture.

Pay expectations are bound to rise

Despite repeated headlines about stagnant salary increases, the recent news about rising bonuses gives existing and prospective employees reason to expect much bigger pay packages and benefits schemes as they progress in their careers. For the average worker, bonuses make up six per cent of their total annual income – the highest proportion since 2008. We still have some way to go to top the 7.1 per cent bonus packages prominent pre-recession, but remuneration trends suggest we’re moving in that direction again. 


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