HSBC will phase out fixed-pay allowances from January 2028, fundamentally altering its compensation structure for employees. According to an internal memo seen by Bloomberg News, the bank will discontinue allowances paid to employees over and above their base salaries, which typically cover specific expenses including commuting costs. The bank emphasized that this change will not result in cuts to base salaries and will not alter its overall approach to total compensation, but affected employees could see a larger proportion of their remuneration linked to variable pay, including bonuses. The approach represents HSBC's move to adopt Wall Street-style remuneration to better align with performance metrics, following similar moves by other major UK lenders.
The revised compensation structure is designed to allow HSBC to reward employee performance more effectively and differentiate compensation based on individual contributions. As reported by Bloomberg News, the shift comes after UK regulators removed the old 2:1 limit on bonus pay, providing financial institutions with greater flexibility to structure remuneration around performance. An HSBC spokesperson stated that "as a global bank, adapting our approach in this way strengthens our ability to pay for performance, better differentiate, attract the best talent, and recognise those who deliver the best outcomes for our customers, clients and stakeholders." The bank's decision reflects the UK's removal of previous restrictions, allowing HSBC to put a bigger share of total pay into variable compensation without cutting base salaries. The planned compensation overhaul follows a similar update from Barclays Plc, which said in July it would switch more of its employees' pay toward bonuses after the UK changed its rules around compensation last year.
The allowance changes are expected to take effect at the start of 2028, giving the bank time to implement the revised arrangements. While base salaries will remain protected, the greater role of variable compensation could make some employees' total earnings more dependent on performance and bonus outcomes. The pay restructuring comes as HSBC pursues a broader push to improve efficiency and expand the use of artificial intelligence (AI), with the proposed changes still under consultation according to the report. Bonuses are typically reset each year, making staff expenses more flexible when revenue slows without touching base pay. Latest financial data shows HSBC spent US$3.93 billion in 2025 on variable pay, up 10% from the previous year, with gross compensation and benefits standing at US$21.5 billion.
The compensation changes are part of HSBC's broader push to improve efficiency and expand the use of artificial intelligence (AI). According to reports, the bank is planning substantial job cuts in its UK wealth management business, including reductions of around 70% in financial adviser roles and about half of management and specialist positions. The proposed changes were still under consultation at the time of the report, indicating ongoing strategic restructuring efforts across the bank's operations as it adapts to the changing financial landscape. CEO Georges Elhedery's broader reorganization has focused on simplifying the business and "pay for performance" as the bank competes for talent. The restructuring has also included cutting long-time benefits such as education allowances and private club membership subsidies in Hong Kong, with the bank ending a long-standing education subsidy covering 95% of school fees and cutting a perk worth up to HK$200,000 that subsidised private club access for bankers.
