NEW YORK (Reuters) - Large Wall Street banks are unlikely to accelerate bonus payouts, even if doling out bonuses in December would cut the tax bills of employees, compensation experts said.
Paying out bonuses early would likely be a public relations disaster for a sector already blamed for the economic downturn, they said.
Morgan Stanley said on Monday it was not considering moving up bonus payouts, becoming one of the first large Wall Street firms to dismiss the possibility.
Only 36 percent of U.S. financial services employees expect to be paid even part of their 2010 bonus before the end of the year, according to data released on Monday by financial job board eFinancialCareers.com.
But many analysts and commentators have speculated Wall Street firms might look to pay out early bonuses.
“It’s a buzz. There’s clearly a fear of taxes changing,” said Anton Schutz, president of Mendon Capital Advisors.
Banks have typically paid a large piece of compensation in the form of a year-end bonus, which is usually paid in January.
This January is unusual, though. On January 1, tax cuts enacted by President George W Bush will expire. The most notable change for high-earners will be a decrease in the top marginal tax rate to 39.6 percent from 35 percent now.
Paying an employee in December instead of January could allow the bank to spend a few percentage points less in compensation, with employees still taking home the same amount as they would had they received their pay a few weeks later. Or banks could share some of their savings with employees.
But banks are not “reputationally out of the woods yet to the point where they can be gaming the system,” said Cornelius Hurley, a professor and director of Boston University’s Morin Center for Banking and Financial Law.
Many industry observers expect a wave of Wall Street layoffs in the coming months.
“It’s very hard to justify laying off workforce at the same time as accelerating bonuses. It’s a public relations disaster,” said Steven Eckhaus, a compensation lawyer with Katten Muchin Rosenman LLP.
Boutique banks, private equity firms and other relatively small, privately-held companies have the most flexibility to give their employees an early payday, but only 8 percent of employees at big banks expect early payouts, said Constance Melrose, managing director of eFinancialCareers North America.
Bank bonuses, which run to millions of dollars for top staff, became a hot-button issue when the government bailed out banks at the height of the financial crisis.
The U.S. government is still closely scrutinizing the banking industry and enacted in July the sweeping Dodd-Frank financial reform law to regulate many industry practices.
Citigroup Inc and Goldman Sachs Group Inc declined to comment on their schedules for paying 2010 bonuses. Representatives for JPMorgan Chase and Co, Wells Fargo & Co and Bank of America Corp were not immediately available for comment.
Reporting by Maria Aspan; additional reporting by Steve Eder and Elinor Comlay in New York, and Joe Rauch in Charlotte; editing by Andre Grenon