Broking cos resort to staggered bonus payout

Jun 04, 2008
Ashish Rukhaiyar
MUMBAI

IT IS that time of the year again when employees at domestic brokerages look forward to receiving their annual bonus. Yet this time round, there were some not so pleasant surprises. For, those lucky to be eligible for a decent bonus were shocked to see their payouts going down by almost 50%. Reason — staggered bonus payout.

Many large-sized brokerages have taken to giving out bonus in tranches in their attempt to address two major issues facing the industry — higher attrition and business slowdown. More importantly, many brokerages are eager to move to the system of staggered bonus payouts in the future.

According to industry sources, some of the biggest domestic brokerages have given bonuses in two tranches in a bid to hold back employees. While most have received one half of their bonus, they have been asked to wait for a couple of months for the remaining half. In some instances, the wait is said to be almost 5-6 months long. Typically, domestic brokerages face a huge exodus in the months of April and May as they dole out their bonuses in March. Dealers and analysts tend to move to greener pastures after collecting their bonuses.

This time round the situation has aggravated on account of their business volume having witnessed a slowdown for the first time in more than four years. The bull run, which started in mid-2005, continued unabated till the start of the current calendar year. During those years, brokerages never faced any such issue as they were aflush with capital. The recent results of most of the listed entities clearly show that their brokerage income has gone down substantially.

In an interesting incident, a recently-listed brokerage with a large clientele is believed to have given out the full bonus but with a caveat. The bonus has been “divided into two notional parts” with one part being called “loan to the employee”. Any employee who quits within a couple of months after receiving the bonus will have to pay back the loan part of the bonus.