PAY IN banks and financial services firms has fallen dramatically, primarily due to the cutting of bonuses and performance-related pay amid the unprecedented crisis in banking.The four banks and two building societies covered by the Government's bank guarantee ceased paying bonuses under the terms of the State bailout of the sector, while performance-related pay has declined dramatically as the level of new lending and sales of financial products has plummeted due to the shortage of credit during the crisis and sharp falls in stock prices.

Wages in the financial sector dropped 11.1 per cent in the 12 months to March 2009, according to Central Statistics Office (CSO) figures released last month. This was due to a 65 per cent fall in "irregular earnings" such as bonuses. However, the CSO found that, excluding bonuses, earnings rose by 5.4 per cent from [euro]26.17 to [euro]27.58 per hour. The number of employees working in financial services rose to 84,300 from 83,200 in the 12 months.

The decline in bank bonus payments, which make up a large part of bank employees' annual pay packages, was broadly in line with declines in the global financial centres of New York and London last year.

The average Wall Street bonus fell by almost 40 per cent in 2008, according to the New York State Comptroller, while the average bonus in the City dropped by 62 per cent, according to figures provided last April by London recruitment firm, Napier Scott. This compared with a worldwide decline of 50 per cent.

Irish financial institutions have all introduced pay and recruitment freezes, though pay cuts have only arisen by way of cutting bonuses and basic salaries have not declined.

Irish Life Permanent, which owns Permanent TSB, the country's largest mortgage lender, said that a pay freeze at the company would generate savings of [euro]22 million this year. The company has also ended bonuses for senior staff and its profit share scheme for employees.

Allied Irish Banks cut staff costs by 9 per cent to [euro]654 million during the first half of this year by not replacing staff who leave the bank and by cutting performance-related pay.

At boardroom level, pay has been cut dramatically in line with conditions set by the Government in return for guaranteeing [euro]440 billion of deposits and funding in the banking system.

The remuneration committee set up by the Government under the terms of the bank guarantee set the annual salaries for the chief executives of Bank of Ireland and Allied Irish Banks at [euro]690,000, at Anglo Irish Bank and Irish Life Permanent at [euro]545,000 and Irish Nationwide and EBS building societies at [euro]360,000.