Instead Handelsbanken, the Swedish bank with bold ambitions for growth in the UK, which has a profit-sharing type scheme which only distributes the proceeds when the individual turns 60. It is one of the co-challenger banks that Vince Cable, the business secretary, wants to encourage lending to small businesses. Every employee from the most junior to the most senior gets the same allocation, which is based on whether the bank outperforms its rivals. There are no sales targets and budgets to meet. Around 90% of the scheme's proceeds are invested in the bank's shares, something that regulators have been keen to encourage. It sounds very egalitarian and at first glance seems like a neat solution to the bonus culture.
But it not as simple as it seems. The so-called Oktogonen Foundation profit-sharing system has run into trouble in the UK. For the last two years the 1,100 UK based staff, working out of 137 branches (a number likely to grow), have not received their allocation because of a change to the tax laws to deal with "disguised remuneration" (pay that was not getting taxed). Until two years ago HM Revenue and Customs had treated Oktogonen as an employer-funded retirement benefit scheme which meant tax was paid on receipt at age 60.
But now as a result of the changes, staff are required to pay tax when their part of the pot is allocated and then when it is disbursed.
In Sweden tax is paid upon receipt by the individual scheme members and the bank now feels it is exposing its staff to double taxation so no distributions have been made to UK staff for two years.
Handelsbanken insists that the scheme was never about tax avoidance. The Treasury refers queries to HMRC, which refused to comment.
In his book on Handelsbanken, Niels Kroner describes Oktogonen as embodying "the bank's visceral dislike for risk-taking, its focus on concentrating on customer satisfaction over profits, and its emphasis on long-term orientation. As the system has been in place for a very long time, there is simply no expectation of any special remuneration for doing the job well. Staff know that they will get a competitive salary and a very generous pension from the Oktogonen foundation once they retire."
Handelsbanken's UK chief executive, Anders Bouvin, is frustrated. He sees Oktogonen as "an integral part of our steering system". Bouvin is looking at the options. He does not reveal what they might be. How ironic it would be if bonuses ended up being the answer.
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