Back in January, the Unite union balloted FCA staff after it claimed the pay deal on offer could create a “bargain basement” regulator. At the time, 87 per cent of those members who voted were in favour of strike action.
However, following consultation with staff, the FCA has come back this week with an amended pay offer, which would see around 800 of the FCA’s lowest paid staff receive average salary increases of £4,310 to “the minimum of a new pay benchmark” according to the FCA. Other salary increases and performance-related pay would take overall increases to an average of around £5,500.
FCA employees who meet performance targets – around 85 per cent of staff – will see salary increases of at least 5 per cent this year and 4 per cent next year, according to the FCA. These staff would also receive a one-off backdated cash payment equivalent to 4 per cent of salary in April “in recognition of the changed economic environment since the consultation was launched in September last year”, the regulator said.
However, all discretionary cash bonuses will be removed from next year, meaning the highest performing FCA staff will see their last bonus paid in April this year.
Nikhil Rathi, chief executive of the FCA, says: “I’m hugely grateful for the time colleagues have spent contributing to the consultation and I understand the strength of feeling about some of the changes we are making. We have welcomed the open debate and discussion and, with the board, considered all the feedback we have received.
"We believe we have developed a fair, competitive, and sustainable offer that will help us achieve our regulatory objectives, as well as diversity goals, that supports the lowest paid and the strongest performers, with most colleagues receiving a minimum salary increase of more than 9 per cent over the next two years and an average of more than 12 per cent over that period.”
However, Unite is still not convinced that the new pay proposals will resolve the concerns it and its members have over the planned changes.
Dominic Hook, Unite national officer, says: “The [latest] pay proposals by the FCA are a grave error and will be significantly harmful for a large number of loyal, experienced and long-serving staff.
“The FCA should get to the negotiating table with Unite and hear from the Unite workplace representatives in order to ensure they do not do irreparable damage to this regulator.”
The key issues concerning staff, as outlined by statements from Unite, are extensive:
- The loss of routine payments that Unite claims the FCA “misleadingly labelled ‘bonuses’”, which amount to between 10-12 per cent of salary.
- The narrowing of pay bands, lower pay bands for Scottish staff, and cuts that affect graduate trainees.
- A threat of future cuts to pensions – although it is unclear at present whether the new proposals resolve this concern or not. Management had been refusing to discuss the details with the workforce, according to Unite.
- Staff outside London are being put on new, lower pay scales, in the face of the government's own stated agenda of levelling-up.
- Management is imposing what Unite dubs an "unfair" appraisal system that requires managers to "arbitrarily downgrade" a certain number of their employees even if they are performing strongly. Current indications are that this system will hit carers, disabled people and minority ethnic staff hardest, according to Unite.
- Persistent problems with staff leaving and difficulties in recruiting replacements. Unite said: “The FCA has yet to provide a full set of figures showing the scale of this exodus.”
- A "botched" consultation process as management rush to implement the changes without giving staff important information. This process has recently received unprecedented criticism from the FCA's own management-run staff association, according to Unite.
- Ongoing high levels of pay inequality that are described by Unite as “unusually high by the standards of public sector regulators”. It added: “Bafflingly, while pay bands for most staff are being ruthlessly squeezed, those for senior managers are being uprated. Already the FCA has around 40 executives who earn more than the prime minister.”
The FCA has 38 members of senior staff including the executive committee earning between £160,000 and £359,000 a year for 2020-21, according to its annual report.
Morale at the regulator has suffered, with a recent survey by Unite finding 89.8 per cent of staff describe their morale as ‘low’ or ‘very low’, according to Hook. Despite the updated pay offer, the concerns outlined above have still not been fully addressed, according to Unite.
Trade unions are already recognised at the Treasury, the Pensions Regulator and the Bank of England, but so far not at the FCA. Unite’s members agree that the FCA needs to reform its operations “to provide the most effective possible service to consumers and businesses”.
It is understood that the regulator met 77 times with colleagues to get feedback for the consultation, and that there has been other feedback online. Each relevant member of the executive committee has been meeting with small groups of staff to allow feedback.
Yet some staff have left already, according to conversations Unite has been having with its members. According to a Unite statement: “Staff were left further enraged as the FCA's [chief executive Rathi] dismissed employees' concerns as ‘noise’ [to MPs in December]."
In the same statement, Hook said: “You cannot regulate the British financial system on a bargain basement basis as the chief executive clearly wishes to do. Management must enter into immediate negotiations with Unite in order to avoid further damage and risk to the FCA."
Pay gaps
For several years, there has been a considerable gender and ethnicity pay gap at the regulator, which is outlined in the FCA’s latest annual report. This is despite having a “high level of diversity with [its] graduate hiring” with 44 per cent identifying as female and 33 per cent as Black, Asian and minority ethnic.
The gender pay gap for regular wages averaged 16.3 per cent in 2021, down from 18.4 per cent in 2020, rising to a 20.2 per cent average for bonus pay.
The ethnicity pay gap is even larger. The average for regular pay is 24.4 per cent while the ethnicity bonus pay gap was 25.9 per cent in 2021 – admittedly 5.9 per cent smaller than in 2020, but still significant across each group.
There is also a disability pay gap at the regulator of 3.8 per cent in 2021, down 0.1 per cent against 2020, and the average disability bonus pay gap has actually risen over the last year, up from 5.2 per cent in 2020 to 15.3 per cent – almost triple – in 2021. The FCA’s report highlighted: “As the numbers declaring a disability are small (less than 5 per cent), this can cause a significant fluctuation in yearly comparisons.”
The FCA’s annual report also explained that although the FCA’s executive directors and the board decided in February 2021 not to increase staff salaries for 2021-22, those paid less than £24,000 a year on a full-time equivalent basis saw a rise of 1.2 per cent.
Funding for performance bonus awards was also reduced, with the most junior roles receiving 11 per cent of salary and those holding the most senior roles – excluding the executive directors – receiving 8 per cent. This meant bonus awards were between £3,100 and £16,795 respectively, with an average spend of 9.8 per cent of average salaries.
It is currently unclear whether the updated pay proposals will address these pay gaps, although the FCA said in its statement: "The result is a positive impact on the pay of younger, female and ethnic minority colleagues in particular."
Clarity and conversation needed
Siobhan Fitzgerald, partner at UK law firm TLT, says: “Fair treatment within an organisation is key to staff morale and engagement. There can sometimes be a lack of transparency around change programmes and their potential impact on more senior managers. Often the impact is just as severe but less visible. Employers are well advised to carefully explain the business case for their proposals and demonstrate how senior management is ‘sharing the pain’ with more junior staff.”
Baroness Ros Altmann, the former pensions minister, says that the FCA is “already under resourced, so further staff losses will make it even harder to carry out all its functions adequately”. But she is more concerned about the impact of this on consumers than the City.
She adds: “If the FCA is unable to adequately regulate the industry, it is likely that customers of financial firms will be exposed to greater risks of losing money or being misled into unsuitable products.
“Of course, there will always be tension between high pay rates in the firms being regulated and lower pay for the regulators themselves and this creates dangers of the best people at the FCA being enticed away by City firms and then having also brought in helpful knowledge of how the regulator operates.
“In an economy already suffering severe staff shortages in certain sectors and high inflation, it is obvious that workers will demand better pay and conditions. I don't think this FCA dispute will be the last and there are significant hurdles to be overcome.”
Altmann adds that part of the problem arises because employers want to pay higher wages to attract or retain staff, but this can entail offsetting these rising costs by reducing staff benefits, such as pension contributions.
However, she says it is “absolutely unacceptable” for female and ethnic minority staff to be paid less if they are performing the same tasks.
She adds: “That is an important element of any levelling up policy and, of course, proper transparency is needed to expose bad practice. Is anyone investigating this matter independently of the FCA?”
For now, time will tell whether the FCA staff will ultimately go on strike, but as yet there appears to be no discussion between the FCA, Unite and/or employment relations service Acas.
Fitzgerald adds: “Most employers will be keen to avoid strike action if they can. Aside from the obvious impact on the organisation, it is generally better to reach an agreed and amicable resolution if at all possible, as a strike can entrench the parties further and create divisions in the workforce. Most senior management teams will engage in further discussions to seek to avoid a strike. Compromise on both sides is likely to be required.”
The FCA has been contacted for comment but provided none at the time of writing.
Alison Steed is a freelance journalist
