Bonuses have climbed back to all but match the level of payouts before the financial crisis, although bankers are receiving less.
After years of depressed pay growth, a recovering economy allowed businesses to give employees £42.4 billion in cash bonuses in the past financial year. This was 2.7 per cent higher than in the previous 12 months.
As a result, bonuses in 2014-15 were just 0.1 per cent below their record level reached in 2007-08, according to this year’s annual report on the subject from the Office for National Statistics.
The industry with the biggest increase in bonuses was professional, scientific and technical services – up £900 million on the previous year – followed by information and communication, with an increase of £500 million.
However, total payments fell in the financial services industry, which includes bankers. About £13.6 billion worth of bonuses were paid out to workers in the finance and insurance sector, down 9.6 per cent on the year.
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This left payments in finance and insurance more than £5 billion below their 2007-08 peak of £18.7 billion. Those in the rest of the economy, by contrast, were £5 billion higher than the pre-downturn record of £23.8 billion.
The average bonus in the financial sector was £13,100, which was almost nine times bigger than for other workers.
As a proportion of total pay, bonuses in finance and insurance have dropped considerably since the downturn, from a peak of 34 per cent in 2006-07 to 20 per cent. In contrast, bonuses have consistently made up around 4 per cent of pay in the rest of the economy.
James Sproule, chief economist at the Institute of Directors, said: “Under pressure from politicians, the public and regulators, banks now realise that the culture of unjustifiably high cash bonuses as a reward for short-term performance is over.”
European rules curbing risky behaviour stipulate that payments can be equal to basic annual salaries, or twice that level if shareholders give their permission. This has resulted in banks increasing fixed pay as well as deferring bonuses and awarding more in shares.
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In November, the chancellor dropped a legal challenge to the European Union on bonuses after learning that it was destined to fail.
David Hillman, a spokesman for the Robin Hood Tax campaign, said: “Financial sector bonuses may be down, but they are still way out of kilter with the rest of the economy. There is a long way to go before the extreme excess of the City is curbed. The best way to ensure the sector is brought back into line is for financial firms to pay more in tax.”
It was revealed last month that about 2,000 staff at Sports Direct, which is majority controlled by Mike Ashley, the owner of Newcastle United football club, will receive a bonus of about £18,000 each.