Peace bonuses and beyond | RBS Remembers

RBS remembers 1914-1918


Peace bonuses and beyond

Staff at work in Leicester St Martins branch, 1920s © RBS

 

Although bank workers received supplementary payments from their employers throughout the war, these were intended to mitigate the effects of the rapidly rising cost of living. They were weighted towards increasing the income of the lowest-paid workers, and were in fact a way for the banks to increase salaries without permanently committing to higher rates. In the year or two after the end of the war, once staffing levels had been stabilised, almost all the banks overhauled their pay scales to incorporate the wartime bonus payments into normal salaries.

To mark the end of the war, several of our constituent banks decided to pay a real ‘bonus’ – a sum in recognition of their staff’s exceptional wartime service, whether in uniform or behind the bank counter, and in celebration of the return of peace. National Provincial & Union Bank of England paid what it called a ‘Peace Bonus’: one month’s salary to each employee.

London County Westminster & Parr’s Bank wanted to make a similar gesture: ‘something more in honour of the great victory of 1918, for which all our staff have so successfully worked.’ It had another major occasion to mark, too, for 1918 had seen the merger of London County & Westminster Bank with Parr’s Bank. There was a tradition in banking of granting staff a bonus to mark such mergers, not only as thanks for the extra work they had to put in, but to launch the amalgamated company on a positive note. With two causes for celebration in mind, the bank hit upon a creative new idea for the bonus.

In January 1919, it announced that it would pay a bonus of 10%, but rather than cash, the bonus would be paid in bank shares. All permanent and temporary staff, from managers down to the lowest-paid messenger, would receive one share for every £20 of his or her salary. No limits were imposed on the recipients’ freedom to sell their shares, although the bank’s chairman told the AGM audience that ‘I venture to express a hope that those who have thus been made shareholders will, if they possibly can, retain their interest in the bank.’

For the bank there was a financial advantage. It still paid its employees’ income tax, so it would cost extra money to pay a cash bonus to anyone whose annual income was over £130, the tax threshold. In contrast, the shares would not be liable for income tax until they were sold, when the tax would be the employee’s responsibility.

There was also an advantage in terms of employee engagement. Social unrest and tensions between workers and employers were widely anticipated in the aftermath of war. Making employees into part-owners of the company was a way to bridge that divide, and keep the bank unified in what would inevitably be challenging post-war years.

 


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