Bankers who receive bonuses could see clawback period arrangements increased from seven to 10 years.
Clawback Arrangements Explained
Clawback is when you have to repay a bonus you have already received (and possibly already spent).
A standard bonus clawback rule was introduced by the Bank of England in 2015. The rule states that if you are found guilty of misconduct as a senior banker, you have to pay back your bonuses for as long as seven years after they were awarded as long as the bonus was awarded after 1 January 2015.
In June, the Bank of England announced that the seven-year clawback period will be increased to a 10-year period from 2016. Further changes are also being considered to restrict the way in which new employers may “buyout” bonuses to make up for those forfeited by leaving the old job before the end of the bonus year.
Fit for Purpose
The purpose of these new rules on bonus clawbacks is to encourage better conduct within financial institutions. Or as the Bank of England puts it, to “ensure firms have remuneration policies that foster sound risk management and discourage excessive risk-taking and short-termism.”
Changing the bonus clawback period from seven to 10 years allows banks and regulators to take action against senior managers who are found guilty of misconduct – even when the misconduct is only exposed many years later. The rationale for the increase is that this better reflects the long-term impact that decisions made by people in senior positions can have.
Slater and Gordon Lawyers senior employment solicitor Samantha Mangwana said:
“I questioned if it would be possible to recover payments from individuals seven years down the line in my blog called Banks to Put “Clawbacks” on Bonuses. Trying to claw back payments for a further 10 years will make this even harder.”
Slater and Gordon Lawyers are experienced representing employees in work pay issues and bonus disputes. If you need top legal advice on bonus pay or help with your bonus dispute call our employment law solicitors on freephone 0800 916 9060 or contact us online and we’ll be happy to help.