HSBC Senior Bankers Lose Fixed Allowances From 2028 as More of Their Pay Moves Into Bonuses

HSBC Holdings will phase out fixed-pay allowances for its senior staff and hand out a greater share of their pay as bonuses, with the switch to the new pay system set for the start of 2028, according to a memo seen by Bloomberg News. For Metaintro readers who work in banking or hope to, this guide explains what a fixed-pay allowance is, why UK banks created them, what the rule changes since October 2023 and October 2025 actually say, and what to ask about your own pay mix.

What Exactly Is HSBC Changing in Senior Pay?

HSBC will phase out fixed-pay allowances for its senior staff and instead hand out a greater proportion of its compensation in the form of bonuses, and the bank will switch to the new pay system at the start of 2028. An internal memo seen by Reuters puts the start of the phase-out in January 2028.

A spokesman for HSBC said in a statement that the approach "strengthens our ability to pay for performance, better differentiate, attract the best talent, and recognise" top performers.

The move makes HSBC the latest UK lender to switch to Wall Street-style remuneration to better align with performance. On Wall Street, bankers have typically received the bulk of their pay through bonuses tied to performance, rather than fixed salaries.

What Is a Fixed-Pay Allowance, and How Has HSBC Paid It?

Fixed-pay allowances were introduced more than a decade ago at major British banks to provide a way of topping the base salary of senior staff after European Union rules capped the compensation of financiers.

At HSBC, the allowances have taken the form of share awards in immediately vested stock, held for a retention period so that an executive's interests line up with the bank's. These payouts are non-pensionable.

Former group chief executive Sir Noel Quinn, who left the Group on 30 April 2025, received, as part of his payments for loss of office, a fixed pay allowance of £566,658 under the contractual terms agreed for the period between 1 January 2025 and 30 April 2025, and it was awarded in immediately vested shares, which are subject to a retention period and released on a pro-rata basis over five years.

Across the wider group, fixed pay may also include fixed pay allowances, cash in lieu of pension and other cash allowances in accordance with local market practice, in addition to base salary.

Why Did UK Banks Use Allowances in the First Place?

The answer is the European bonus cap. That cap, introduced by the European Union in 2014, had limited bonuses to twice an employee's base salary. Allowances became a way of topping the base salary of senior staff once bonuses were capped.

UK regulators later removed the cap. Because the cap did not limit total pay, the regulators considered that it can place upward pressure on salaries and allowances that may not be linked to longer-term performance. Such a bonus cap is not routinely imposed in other leading international financial centres outside the EU.

The requirements took effect on 31 October 2023, applying to a firm's performance year that was ongoing on that date and to future years. The change covers banks, building societies and PRA-designated investment firms, and it is not relevant to credit unions, insurers, and FCA solo-regulated firms.

"Since the bonus cap does not limit total remuneration, the regulators consider it can place upward pressure on salaries and allowances that may not be linked to longer-term performance and cannot be reduced or clawed back in the event of later failure and/or previous misconduct coming to light," according to the PRA and FCA bonus cap policy statement.

Which UK Rule Change Came Last Year, and Why Does It Matter?

Two separate rule changes are involved. The bonus cap went first, with the removal of the variable-to-fixed pay ratio cap implemented in 2023. Barclays set out plans in July to move more pay into bonuses after Britain changed its rules around compensation in 2025.

That newer change is the joint policy statement the Prudential Regulation Authority and Financial Conduct Authority published in October 2025. Under it, all MRTs will now be subject to the same 4-year minimum deferral period. MRTs are material risk takers, the staff who have a material impact on the firm's risk profile. Before the change, certain Senior Management Functions faced a 7-year minimum deferral period.

The deferral share also eased. The regulators introduced a marginal deferral system with 40% of a bonus to be deferred up to £660,000 and 60% above that level, and firms may now pay a greater proportion of cash up front, provided that the deferred portion contains a correspondingly higher proportion of instruments. Firms could apply the deferral and retention changes on an optional basis, to a firm's performance year which is ongoing on 15 October 2025, and all other changes come into force on 16 October 2025 and apply to performance years starting after that date.

The regulators expect the reforms to help UK firms attract and retain talent, and the UK rule changes have now lessened the need for these fixed-pay allowances.

What Does HSBC's Annual Report Say About Pay Right Now?

HSBC's board remuneration committee welcomed the October 2025 changes to the PRA remuneration rules in the bank's 2025 Form 20-F, saying they can help allow for a greater proportion of total compensation to be delivered as variable pay.

A review was already planned. The 20-F named a review of the pay structure for senior executives as a key priority for 2026, following the October 2025 changes to the PRA remuneration rules.

For staff covered by the PRA rules, some changes are already in place. The deferral period for variable pay awards relating to the 2025 performance year has been reduced to four years, the one-year post-vesting retention period for deferred shares has been removed, and the threshold for the 60% deferral rate has increased from £500,000 to £660,000.

Fixed pay remains the largest part of most colleagues' reward at HSBC, and the bank made an overall fixed pay increase of 3.2% effective in 2026, with the highest increases made to lower paid colleagues relative to relevant market benchmarks.

The committee determined total variable pay of $3,930m, up 10% compared with the $3,570m awarded in 2024 after adjusting for disposals and organisational changes.

How Are HSBC Bonuses Paid Out and Deferred?

Under HSBC's group policy, variable pay for employees is limited to 10 times fixed pay, except where local regulations require otherwise, and all colleagues are eligible to be considered for a discretionary variable pay award.

Bonuses are not all paid at once. A portion of annual incentive awards above a set threshold is deferred in shares vesting annually over a three-year period (33% vesting on the first and second anniversaries of grant and 34% on the third).

Material risk takers face stricter terms. For them, at least 50% of the awards are in shares and/or where required by regulations, in units linked to asset management funds, and variable pay for MRTs under the PRA rules is subject to a four-year deferral period. At HSBC, variable pay represents a higher proportion of total compensation for more senior colleagues.

HSBC's executive Directors receive fixed pay as base salary, benefits and cash in lieu of pension at 10% of base salary. Group chief executive Georges Elhedery's base salary is £1,500,000 from 1 March 2026 (unchanged from prior year), and his annual incentive can reach a maximum of 300% of base salary.

"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," a spokesman for HSBC said in a statement to Bloomberg News.

How Have Barclays, JPMorgan and Citi Looked at Pay Since the Rule Changes?

HSBC is following a similar update from Barclays, which in July set out plans to switch more of its employees' pay toward bonuses. Barclays is moving to higher variable compensation and lower fixed pay, Chief Financial Officer Anna Cross said in July.

Barclays' July earnings statement showed it paid out £1.3 billion ($1.7 billion) of performance costs in the first half of the year, up almost 30% from about £1 billion a year ago, while salaries rose less than 1% during the same period.

In January 2026, JPMorgan Chase and Citigroup were mulling reductions to fixed pay for their senior executives in the UK, Bloomberg reported, as relayed by Retail Banker International.

JPMorgan had around 600 UK material risk takers at the end of 2024, and Citigroup had at least 500 based on regulatory filings. Goldman Sachs confirmed in 2024 that it was lowering fixed allowances for its approximately 630 material risk takers.

BNP Paribas, headquartered in France, said in January 2026 it will not be making any changes to its allowance policy.

What Else Has HSBC Cut Under Its Restructuring?

The pay overhaul is part of a broader restructuring. Elhedery took over as chief executive officer in September 2024, and his shake-up has led to the sale, closing or merger of several businesses and hundreds of job cuts.

Perks have been trimmed too. HSBC had already ended a long-standing education subsidy covering 95 percent of school fees for the children of new hires and senior staff relocating to the city in Hong Kong, although existing band-three employees and managing directors who already receive it keep it, Bloomberg News reported in September.

HSBC is also cutting a perk worth up to 200,000 Hong Kong dollars, or $25,485, that subsidized some private club access for its bankers in the city.

What Has HSBC Not Said Yet?

Several details that matter to individual bankers are missing. No figure has been published for how many senior staff receive fixed-pay allowances, or how many will move to the new pay system.

HSBC has not published a new split between fixed and variable pay for these roles, nor disclosed whether any part of a lost allowance will be folded into salary once it moves to a greater proportion of its compensation in the form of bonuses.

It is also unclear whether the switch applies the same way in every country. HSBC's group pay policy allows fixed pay to include allowances in accordance with local market practice, and no country-by-country breakdown of the change has been published.

What This Means for Bankers and Finance Job Seekers, and What Should You Do Next?

For senior bankers at HSBC, the core change is that a fixed allowance paid in immediately vested stock will give way to a greater proportion of compensation in the form of bonuses. Under HSBC's policy, the bonus is a discretionary variable pay award, and bonuses are typically reset each year, so that part of pay can rise or fall.

If you are at HSBC or interviewing there, here is what to do.

• Ask for your pay mix in writing. Ask what share of your total pay is base salary, allowance and target bonus today, and what it will be once the new pay system starts in 2028.
• Ask how the bonus is paid. Check how much is deferred in shares vesting annually over a three-year period, and whether you are a material risk taker subject to the four-year deferral period.
• Compare offers on the full package. Barclays is moving to higher variable compensation and lower fixed pay, so compare guaranteed pay and bonus targets side by side before you negotiate a job offer.
• Know what you can ask. Before you sign, read up on pay transparency laws and what you can ask where you work.

When more of your pay depends on results, knowing how those results are judged becomes part of the job offer.

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People Also Asked

Q: When will HSBC stop paying fixed-pay allowances?

A: HSBC will switch senior staff to the new pay system at the start of 2028, according to a memo seen by Bloomberg News.

Q: Why is HSBC moving more senior pay into bonuses?

A: A spokesman for HSBC said in a statement that the approach "strengthens our ability to pay for performance, better differentiate, attract the best talent, and recognise" top performers, and the bank plans to hand out a greater proportion of its compensation in the form of bonuses.

Q: Why did UK banks pay fixed allowances at all?

A: They were a way to top up senior pay after the EU cap limited bonuses to twice an employee's base salary, a cap UK regulators removed with effect from 31 October 2023.

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