Rothschild eyes early bonus round to avoid possible windfall tax

Arash Massoudi

Rothschild, the boutique investment bank, is considering paying its 2014 bonuses early to avoid the extra taxes Labour has vowed to introduce if it returns to power, two sources familiar with the bank's thinking said.
The deliberations show how seriously businesses are taking the prospect of Labour winning the May 6 election and displacing the Conservative-Liberal Democrat Coalition that has held power since 2010.
Labour has promised to levy a windfall tax on bankers' bonuses, which they say will raise between £1.5 billion and £2 billion in the first year of the next parliament. Ed Balls, the shadow chancellor, has threatened to renew that in the second year if bankers do not show more restraint on pay.
Rothschild usually pays bonuses to its 1,000 London staff in June, but may pay them before the general election, the people said. The bank declined to comment on changes to the timing of this year's payouts.
"Rothschild annually distributes a percentage of its
profits for the year to its staff as a profit share," the bank said. "The payment date of this distribution varies across divisions and geographies."

Harold Cunningham | Getty Images

The plaque of the private bank Edmond de Rothschild

A third person familiar with Rothschild's said a desire to align those disparate payment dates across the group had also prompted the bank's review of its bonus payment dates. The bank reorganized its corporate structure in 2012 and has been trying to align its scattered business units since then. A final decision on the timing of bonuses is expected to be taken before the Rothschild group's year end on March 31.
From 2015, banks across the European Union face new constraints on the bonuses they pay their senior staff and key risk takers, a group described by regulators as 'code staff'.
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Those rules affect just a small number of Rothschild's U.K. workers. NM Rothschild's 30 code staff shared bonuses of £12 million in 2013/2014, giving them an average of £400,000 each, on top of their average fixed pay of £216,000, the bank's accounts for the year ended March 2014 show.
Labour's proposed tax would affect a far wider group of bankers. The party has also said it will increase the clawback period for bonuses for bankers found guilty of wrongdoing from seven years to 10.
Most UK investment banks have already paid out 2014 bonuses and almost all are scheduled to pay before the election. Bonuses have been falling across the sector in anticipation of the new EU rules, which will affect bonuses for performance in 2015 and subsequent years.
Many banks have compensated by increasing base salaries for junior staff and by introducing 'role based allowances' for seniors. They have also introduced a host of new initiatives to improve bankers' work lives.