UK banks must tackle wealth inequality despite timely payments

LONDON — Britain’s financial sector is being urged to do more to help workers struggling with the cost of living crisis, despite a slew of big name banks offering low-income one-off payments.

Nationwide announced on August 15 a payment to more than 11,000 employees to help with the rising cost of living. The payment is for those earning £35,000 ($42,300) or less a year, or 61% of the workforce.

“The coming months will be worrying for many people and we are always considering new ways to help our members. But rising prices are also affecting our colleagues and that is why we are providing this additional support,” Debbie Crosbie, CEO of Nationwide Building Society, said in a press release.

The world’s largest building society – an organization that lends capital for the construction of property – is the latest in a series of UK-based financial institutions offering help to employees.

This move makes sense, as the banking sector is reaping the rewards of the higher inflation rate that is strangling so many others.

As inflation – the rate at which prices rise over time – rises, interest rates also rise, generating more revenue for banks. The Bank of England launched its biggest interest rate hike in 27 years on August 4, the sixth rate hike since December 16, 2021.

The UK’s biggest banks have gained billions of pounds following the Bank of England’s latest rate hike, with Barclays, HSBC, NatWest, Lloyds and Santander holding as much as £673.5bn in central banks at the end of June, according to analysis by the British newspaper The Times.

Labor rights group Unite the Union has lobbied organizations, including banks, to offer financial support to employees.

“We wanted to reopen the wage negotiations that had been closed,” Unite national officer Dominic Hook told CNBC.

“Usually what happens is that the pay year starts in March or April, so we will often have salary negotiations towards the end of the previous year … So what we were saying is that we agreed that last year, but now we have a cost of living crisis, so we want to reopen negotiations,” he said.

Some banks agreed to negotiate salaries, while others opted for one-off payments.

Wealth inequality

Lloyds announced a one-off payment of £1,000 to 99.5% of its colleagues in June, excluding senior management and executives, while TSB offered the same amount to all 4,500 staff earning 35,000 £ or less.

Virgin Money offered £1,000 to employees earning £50,000 or less in August, and HSBC gave its lowest-paid workers a £1,500 cost-of-living payment the same month.

While these supports can be welcome boosts for employees, they may not go far enough, said Ruth Thomas, chief product evangelist at compensation software and employee management firm Payscale.

“We find that some employers have a history of paying one-time bonuses to help workers get through the cost of living crisis. While these may provide temporary relief to lower-paid employees, they do not solve fundamental issues of wealth inequality between organizations,” she added. said.

One-time financial perks also might not be the best way to keep employees, Thomas said.

They want access to income progression over the course of their employment, she told CNBC.

“In the face of rising cost of living and wage inflation, employees are self-assessing fair wages…With a vibrant labor market, changing jobs remains the quickest way to ‘increase your salary.’

Base Salary Changes

Other financial institutions have made longer-term changes to employee salaries.

Barclays announced in June a pay rise for 35,000 of its UK-based employees. People in customer support, branch and junior roles have received a £1,200 increase in their annual pensionable salary from August 1.

NatWest Group announced in July a permanent 4% pay rise for UK employees earning less than £32,000, while Santander offered the same percentage increase to UK employees earning less than £35,000.

The Co-Operative Bank offers support to a much wider range of employees. Anyone earning up to £80,000 will receive a basic pay rise of £1,000 from September. This follows a one-time payment of £300 to those earning up to £30,000 in July.

The bank is “committed to helping customers and colleagues during these difficult times”, according to CEO Nick Slape.

“This base salary change will apply to approximately 95% of colleagues at the Bank, excluding those already on the highest salaries,” he said.

But the salary discussions do not stop there. Unite the Union is already thinking about next year’s wage negotiations.

“We will soon start thinking and talking about the pay raises that should be given next year, and our assertions will certainly be that people should at least benefit from inflation,” Hook said.

“We don’t want people to take a pay cut in real terms. They will need a pay raise, no doubt,” he said.

Rising interest rates mean banks should be able to offer higher wages, Hook told CNBC.

“Their margins are better on things like mortgages – they still make big profits, they’re doing very well, so I don’t see why they shouldn’t be able to pay their staff well.”

Challenger banks have been less forthcoming with one-time staff payments and salary increases.

A Revolut spokesperson said the organization will “support [its] employees as the cost of living increases around the world.

“We continuously monitor the market and compensate our employees in the top quartile. In July, we also introduced a new salary review process, in which we committed to taking into account the local inflation rate so that our employees are paid fairly to reflect rising costs of living,” they added.

Atom, Monzo, OakNorth and Starling did not respond to requests for comment for this article.

Comments are closed.