The FSA has issued further consultative guidance on the application of the Remuneration Code (see Regulatory Roundups 29 and 24 for details of previously released guidance and a general summary of requirements respectively).
The paper is specifically on Principle 12(c), which is concerned with guaranteed variable remuneration(covered in SYSC 19A.3.40 to SYSC 19A.3.42). As firms will be aware, this principle applies firm-wide and is not restricted to ‘Code Staff’.
There seems to be general clarity on ‘sign on awards’ where a fixed award is provided to incentivise an individual to join the firm. The guidance addresses the concept of ‘buy-in’ where a firm offers to compensate a new hire for the outstanding deferred remuneration that they are forfeiting by joining the firm. Key to the guidance is the need to ensure that the buy out is not more generous than the award from the previous employer and it must be subject to appropriate performance adjustment as per the current SYSC 19A.3.41(1)(b).
Any firm needing to consider such a situation should bear in mind that the guidance also tells us that “the FSA does not encourage the use of buy out awards”.
A reminder to firms that the Transitional Provision in respect of remuneration structures available to firms not previously subject to the Remuneration Code (see Regulatory Roundup 29 for details) expired on 1 July. The effect of this is that such firms are now expected to comply with the Remuneration Code requirements in full and as appropriate to their proportionality tier.
Responses are invited by 4 August.
