Bonuses soar as market booms

Brokers and backoffice staff at brokerages are popping the champagne to celebrate their year-end bonuses""with the stock market booming, they are certainly hefty this year.

The average performance-linked bonus at the middle level is Rs 5-7 lakh. At higher levels, the bonus can get you a decent D-segment car (Rs 15-25 lakh), cash down. That is still small beer, compared with what foreign brokerages are forking out.

The average performance-linked bonus at foreign brokerages is between Rs 40 lakh and Rs 50 lakh at the middle level, and close to Rs 75 lakh at the top level.

The average performance-linked bonus in the industry is almost 100 per cent of the fixed component of the annual salary.

Motilal Oswal, chairman and managing director, Motilal Oswal Securities, told Business Standard: "The average bonus in our firm this year varies between 50 per cent and 100 per cent of the fixed salary. Also, we are planning to hike a dealer's average salary by 10-15 per cent in the coming months."

Adds Paresh Khandwala, director, Khandwala Securities, "Certainly the stock market has seen a big turnaround this year, and this is reflected in a big jump in performance-linked bonuses to employees." Several domestic brokerage houses have even announced interim performance-linked bonuses.

Notes Kamlesh Gandhi, executive director, Centrum Finance, "Year-end bonuses are a common practice in the US to keep traders and key employees committed to the organisation." He adds, "Performance-linked bonus is essential because it rewards the effort a trader puts into his job, which determines the profit of the organisation."

But dealers and fund managers who have got fat bonuses have not been splurging, though many admit to be spending more on travel and holidays.

A dealer at a foreign brokerage said after having been on his feet for the last six months, he hoped to take a break for Christmas and take his family to Switzerland and Venice. A fund manager said he was buying the latest HP Beanstalk for his son. No one is indulging in ostentatious spending.

"Most of those who have got their bonuses are planning to travel or to invest in some fixed asset such as a house," said a dealer at a domestic brokerage.

Big foreign institutional brokerages have flourished this year, with the biggest of them bagging most of the foreign institutional investor (FII) business. Stock market indices have shot up too. The Bombay Stock Exchange Sensex has added 2,013.60 points, or nearly 59.63 per cent, in the calendar year so far, to close at 5,390.88 on Monday.

The wealth effect

• Average bonus at the middle level is Rs 5-7 lakh
• At higher levels, it is Rs 15-25 lakh
• At foreign brokerages, bonus is Rs 40-50 lakh at the middle level and close to Rs 75 lakh at the top level