UK banks told to tackle wealth inequality despite lump sum payments

LONDON — Britain’s financial sector is being urged to do more to help workers battling the cost-of-living crisis, despite a host of big banking names providing one-time payments to low-income earners.

nationwide announced on August 15 a payment to more than 11,000 employees to help with the increase in the cost of living. The payment is aimed at those earning £35,000 ($42,300) or less a year, which is 61% of the workforce.

“The next few months will be worrying for many people and we are always considering new ways to help our members. But rising prices also affect our colleagues and that is why we are providing this additional support,” Debbie Crosbie, CEO of Nationwide Building Society said in a press release.

The world’s largest building society, an organization that lends capital for the construction of properties, is the latest in a string of UK-based financial institutions offering help to employees.

The move is logical, as the banking industry is reaping the rewards of the higher rate of inflation that is strangling so many others.

As inflation increases, the rate at which prices rise over time, so do interest rates, generating more income for banks. The Bank of England launched its biggest interest rate hike in 27 years on August 4, the sixth rate hike since December 16, 2021.

The UK’s biggest banks have gained billions of pounds as a result of the Bank of England’s latest rate hike, with barclays, HSBC, NatWest, lloyds Y Santander have up to £673.5bn in central banks at the end of June, according to analysis by the British newspaper The Times.

Workers’ rights group Unite the Union has been pushing for organizations, including banks, to offer financial support to employees.

“We wanted to reopen salary negotiations that had been closed,” Unite national officer Dominic Hook told CNBC.

“Usually what happens is the pay year starts in March or April, so we’ll have pay negotiations often towards the end of the previous year… So what we were saying is we agreed to it last year, but now we have a cost -of-living the crisis so we want to reopen the negotiations,” he said.

Some banks agreed to negotiate salaries, while others opted for one-time payments.

wealth inequality

Lloyds announced a one-time payment of £1,000 to 99.5% of its colleagues in June, excluding senior managers and executives, while TSB offered the same amount to the 4,500 members of staff earning £35,000 or less.

virgin money offered £1,000 to employees earning £50,000 or less in August, and HSBC gave its lowest-paid workers a cost-of-living payment of £1,500 in the same month.

While these support measures may be a welcome boost for employees, they may not go far enough, said Ruth Thomas, head of product evangelism at employee compensation and management software company Payscale.

“We are seeing the practice among some employers of paying one-time bonuses to support workers during the cost-of-living crisis. While these may provide temporary relief to lower-earning employees, they do not address the core issues of income inequality. wealth between organizations,” he said. he said she.

One-off financial benefits may also not be the best way to keep employees, Thomas said.

They want access to income progression over the course of their employment, he told CNBC.

“In the context of rising cost of living and wage inflation, employees make their own assessments of fair wages…With a buoyant job market, changing jobs remains the fastest way to increase your pay.”

Changes in base salary

Other financial institutions have made longer-term changes to employee salaries.

Barclays announced in June a pay rise for 35,000 of its UK staff. Those in customer service, branch and junior support roles received a £1,200 increase in their annual pensionable salary from 1 August.

The NatWest Group announced in July a permanent 4% pay rise for UK employees earning less than £32,000, while Santander offered the same percentage rise to UK employees earning less than £35,000.

The Cooperative Bank is offering support to a much broader range of employees. Anyone earning up to £80,000 will receive a £1,000 base salary increase from September. This follows a one-time payment of £300 to those who earn up to £30,000 in July.

The bank is “committed to helping clients and colleagues during these difficult times,” according to CEO Nick Slape.

“This base salary change will apply to approximately 95% of colleagues across the Bank, excluding those who already have the highest salaries,” he said.

However, the discussions about salaries do not end there. Unite the Union is already thinking about next year’s salary negotiations.

“It won’t be long before we start thinking and talking about the pay raises that should be given next year, and our claims will definitely be that people should get at least inflation,” Hook said.

“We don’t want people to take a pay cut in real terms. They will need a raise in pay, for sure,” he said.

Rising interest rates mean banks should be able to offer higher wages, Hook told CNBC.

“Their margins are better on things like mortgages – they’re still making big profits, they’re doing very well, so I don’t see why they shouldn’t be able to pay their staff adequately.”

Challenger banks have been less forthcoming about one-time staff payments and salary increases.

A Revolut spokesman said the organization “will support [its] employees as the cost of living increases around the world.

“We continuously monitor the market and pay our employees in the top quartile. In July we also introduced a new salary review process, in which we committed to taking into account the local rate of inflation so that our employees receive fair pay that reflect the rising cost of living,” they added.

Atom, Monzo, OakNorth and Starling did not respond to requests for comment for this article.

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