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The Margin: Wall Street bonuses will jump up to 35% this year — the most since the Great Recession

Looks like the year is ending on a high note for many Wall Street employees. 

Pay consultancy firm Johnson Associates predicts that the bonuses for bankers and equities traders will jump 20% to 35% this year — the biggest bonus pay bump since 2009. The year-end incentives include cash bonuses and equity awards.

Investment banking underwriters are expected to score the most, with their rewards jumping 30% to 35%. And the report predicts that investment banking advisors and equities traders will see their rewards jump 20% to 25%.

The analysis also projects double-digit increases in bonuses for professionals at private equity and asset management firms and hedge funds, as well as for those in management and staff positions. And retail and commercial banking professionals could be looking at bonuses increasing a modest 5% year-over-year. 

This table breaks it down. 

Predicted Wall Street bonuses for 2021.

Johnson Associates, Inc.

“This year’s bonus season on Wall Street should be one for the record books,” said Alan Johnson, managing director of Johnson Associates, in a press release. “Virtually all financial services industry segments, including investment banking, asset management and alternative investments are performing at record levels. This, in turn, will translate into incentive award increases we haven’t seen in the industry since before the Great Recession.”

Indeed, the third quarter is shaping up to be a record for S&P 500
SPX,
-0.18%

earnings per share — yes, despite concerns over inflation, labor shortages and supply-chain issues, according to DataTrek. And it’s been a banner year for IPOs (initial public offerings).

Read more: This factor ‘can trump pretty much anything else’ in S&P 500 performance, according to DataTrek

But the report also notes that firms should be concerned about holding onto employees, as the “Great Resignation” has seen a number of workers leaving their jobs during the COVID-19 pandemic, and many employers are struggling to hire talent. Some 4.3 million Americans voluntarily left a job in August, which was the highest on record in two decades. More than half of American workers are looking for new jobs in the next year, according to a recent Bankrate survey.  The reasons vary, including people reevaluating their priorities or looking for better work-life balance, or the labor shortage giving more workers the leverage to land a better or higher-paying position. 

“Along with a positive outlook for the coming year, there is a growing concern for the retention of key talent,” Johnson wrote in the Wall Street bonus report — even if bonuses have surged. “For the intermediate term, companies should put at least some stakes in the ground to creatively align pay programs and workforce management with desired culture and compensation philosophy.”

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