The bonus system in banking differs significantly in the US and Europe. In the US, bonuses are often closely linked to the bank’s performance and profit. In Europe, bonuses are usually part of regular compensation and are paid independently of the bank’s financial performance. These differences mean European employees are less incentivised to improve their performance or increase the bank’s profitability.
Another difference is that the American bonus system is often less regulated than the European system. This dissimilarity gives American banks more freedom to design their bonus systems according to their needs and objectives. In contrast, regulated European banks are constrained by many rules and regulations governing the structure and payment of bonuses.
Despite the advantages and disadvantages of the various bonus systems in banking, they must be designed and regulated appropriately to promote employee motivation and the financial stability of banks and the financial industry. It remains to be seen whether a more vital link between bonuses and performance will be introduced in Europe to improve employee motivation and profitability or whether the differences between bonus systems in the US and Europe will continue to widen.
Fortunately, independent wealth managers have a bit more leeway here. Some see this as a motivation booster, but there, too, fair and, if possible, standardised rules have to be implemented. Shareholders and infrastructure investments should not be neglected here either. Still, clear conditions here, too, will help ensure the company’s continuity for loyal clients for many years.
Source: LinkedIn
