Long ReadMay 9 2022

Will the FCA strike affect its work?

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Will the FCA strike affect its work?
FCA staff strike out the FCA offices in London. (Fotoware)

When FCA chief executive Nikhil Rathi was grilled by Treasury Committee MPs last December on the plans, he said changes were being made to address cultural issues and simplify pay structures. 

But staff industrial action in response to the regulator’s employment offer could put further pressure on an already overstretched service.

Members of Unite, the union that represents staff at the regulator, voted to strike on May 4 and May 5 and also take part in a continuous work-to-rule, which will consist of staff working strictly to their contracts of employment, job descriptions, shift start and finish times and working hours. 

The key concerns by staff include the loss of routine payments labelled "bonuses", which represent 10 to 12 per cent of salary; the narrowing of pay bands; lower pay bands for Scottish staff; cuts affecting graduate trainees; and a threat of future cuts to pensions.

FCA delays

Rachel Adamson, head of fraud at Adkirk Law, says that while the FCA is not as under-resourced as others areas of UK enforcement, it still faces significant pressures when it comes to the investigation and enforcement of fraud, which has only been exacerbated by the huge increase of fraud in the past few years.

Adamson adds: “Divisions conducting investigations, such as the enforcement and market oversight division, will be particularly hard hit by any absences as they require a huge amount of resource, and this strike action – even if it is of a limited nature – will elongate what is already a very lengthy investigation process.”

Derek Bradley, chief executive of Panacea Adviser, says while any action will have little visible impact on any business or regulated individuals who could be considered ‘bad actors’ with bad intent, it could have an impact on those trying to run a business.

Firms are in limbo to a degree, with waiting for FCA responses hanging over them.Mel Holman, Compliance and Training Solutions

It is understood that 61 per cent (380) of the 624 Unite members participated in the vote for industrial action, with 294 voting for strike action, which amounts to between 8 to 9 per cent of the total FCA workforce.

Adamson adds: “It’s hard to predict the impact of FCA industrial action on the wider financial adviser community – after all, the delays in the decision-making processes and investigations are already so long that it is difficult to see how this strike action will significantly impact their work.

“Financial advisers could be at risk of suffering from authorisations delay, due to absences induced by strike action, which may prevent them from being able to operate efficiently.”

Mel Holman, director of Compliance and Training Solutions, says: “There are [IFA] firms out there who had FCA visits as a result of the DB transfer advice review. Feedback was issued over a year later from the initial visit and the queries have not been closed off mainly due to the delays at the FCA. 

 

“This means that firms are in limbo to a degree, with waiting for FCA responses hanging over them.”

The FCA has said it is hiring more staff and making certain processes digital to tackle backlogs.

Alistair Cunningham, director at Wingate Financial Planning, says: “Given most times we have a request to the FCA it’s a matter that takes some number of months to reply, I would not see an immediate impact to us through the strike.”

Pay offer

As part of the FCA’s offer, around 800 of the regulator’s lowest paid colleagues will receive average salary increases of £4,310 to the minimum of a new pay benchmark, with other salary increases and performance related pay, taking overall increases for them to an average of around £5,500. These increases, the regulator says, come with higher pension contributions and flexible benefits. 

Additionally, colleagues who meet their performance targets will receive salary increases of at least 5 per cent this year and 4 per cent in 2023. 

Staff who hit their performance objectives would have received a one-off, back-dated 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 average base pay rise for colleagues this year will be around 7 per cent and almost 13 per cent over the next two years.

Meanwhile, discretionary cash bonuses will be removed for all staff from next year, with the final bonuses paid to the highest-performing FCA colleagues last month.

Even with the right culture and high levels of employee engagement, industrial action may still occur.Anne Sammon, Pinsent Masons

On the strike action, Sharon Graham, Unite general secretary, says: "Unite members at the FCA must be congratulated for taking a stand against the disgraceful actions of the management under the leadership of the chief executive Nikhil Rathi."

Graham adds: “The imposition of changes to pay, terms and conditions at the FCA has left thousands of staff worse off. Management’s ludicrous claims that the changes will boost worker productivity has only added insult to injury.”

An FCA spokesman says: “The changes we have made ensure the FCA’s pay and benefits package remains one of the best, if not the best, of any regulatory or enforcement agency in the UK. 

 

“We acknowledge the result of the ballot of Unite members, and respect colleagues’ votes and their strength of feeling about some of the changes we have made.”

Anne Sammon, employment expert and partner at Pinsent Masons, says while the discretionary performance bonus scheme is often valued by employees, there can be challenges in operating it because it can result in disputes where employees feel that their contributions are under-valued relative to those of their colleagues. Meanwhile, the culture of a company can affect the way disputes are managed.

She adds: “A well put together discretionary bonus scheme can also incentivise employees to behave in a way consistent with a firm’s expectations and values, including in respect of diversity and inclusion, which we know is a real focus of the FCA.

"The culture of an organisation and its levels of employee engagement are significant factors that may help to avoid industrial action.

"However, even with the right culture and high levels of employee engagement, industrial action may still occur where there are significant changes to the employer’s remuneration package, which are viewed by the employees as being detrimental.” 

Ima Jackson-Obot is deputy features editor of FTAdviser