The last report and accounts showed that Mr. Antonio Horta-Osorio, Group Chief Executive, is paid some 169 times more than the average worker in Lloyds Banking Group. The Lloyds pay gap is the highest in the UK financial services sector, and one of the highest in the world. We have no problem with paying for performance but there will be some who will say that when you look at total shareholder return, which over the last 5 years has been 0.8%, Mr Horta-Osorio’s performance has been less than impressive. Last week, he announced that Lloyds was putting aside a further £1.8bn to pay for PPI, and that’s on top of £20bn already spent. The PPI free for all – especially for the claims management companies – will be one of his lasting legacies.
The market, stupid
In justifying Mr Horta-Osorio’s salary, the bank says that he’s being paid the market rate for the job. Well, that’s what we want for all Lloyds staff.
A large proportion of Lloyds staff are still not paid the market rate for their role despite the fact that they are fully effective and experienced, just like Mr Horta-Osorio. Many of those staff have been doing the same role for years.
In a recent ‘Hive’ exchange with Jennifer Tippin, Group Director People and Productivity and Matt Sinnott, Group Reward Director, staff provided real life examples of how long it will take them to get into the ‘Market’ zone, let alone the market rate for the job. One member of staff said: “I calculated that it would take me another 16 years to even get into the bottom of the Market rate, and about 23 years to reach mid-point”. Another asked “How long are you supposed to be in ‘Market Primary’? 19 years feels like a long time to me!” It is a long time, about 17 years too long!
In his response, Mr. Sinnott said: “Within the overall budget for pay increases, we progress colleagues towards the mid-point for their role as quickly as possible”. We have underlined the operative words. The bank’s pay budgets are simply not big enough to ensure that staff are moved to the mid-point for their role within a reasonable timescale. All staff should be at their mid-point within two years, regardless of their grade. And let’s not forget, staff recruited externally are invariably brought in at the market rate, which causes understandable resentment from long-serving staff.
In the last two years the pay budgets agreed by the HR approved staff unions have been 2.5% and 2.6%. respectively. The pay progression problem is not going to be resolved with those budgets. The pay pots for the next two years should be set at a level which allows staff to move to the mid-point for their role, and not just the ‘Market’ zone, in 2 years.
Smoke and Mirrors
Increasing the pay pot for the next few years is what the bank should do to deal with pay progression but instead what it’s planning to do is move to fewer grades (it may even call them ‘Levels’) and introduce job families instead. Lloyds is trying to distract staff from the real problems – pay progression and career development.
Job families is not a new concept. IT staff have been subjected to different variations of the job families approach over many years. Lloyds thought about introducing it for everyone in the bank years ago but realised, at the last minute, that it doesn’t work. It creates many more problems than it solves.
We will talk about this more in our next Newsletter. In the meantime, members with any comments or questions can contact the Union’s Advice Team on 01234 262868.