Citigroup boosts salaries to offset lower bonuses

NEW YORK (AP) — Citigroup Inc. is increasing the base salaries of many employees — reportedly by as much as 50 percent for some workers — as it restructures their compensation amid government restrictions on bonuses.

The higher salaries are not the equivalent of annual raises because bonuses are being lowered, according to a person familiar with the matter who requested anonymity because the plans have not been made public.

Employee compensation at financial companies, particularly in the form of bonuses, has brought criticism from members of Congress and the public after the government gave the banks hundreds of billions in bailout dollars.

Citi and the other companies who still hold bailout funds face limits on bonuses as part of a new government compensation oversight plan.

The person said the changes would not affect the amount of an employee’s compensation. By shifting the mix in compensation packages, the change could allow Citi to pay most employees as much as they received in 2008 while adhering to bonus caps. The person said the employees included traders, who tend to be compensated more heavily with bonuses, and middle- and lower-level managers whose compensation is more heavily weighted toward salaries.

Not all employees will be affected equally by the change in compensation, according to the person. Only those who receive a base salary and bonus could see an adjustment. Even then, the adjustments will vary based on an employee’s position and current breakdown of pay between base salary and bonus.

A New York Times report Wednesday said some employees salaries will rise by as much as 50 percent because of the change in compensation structure.

But some analysts weren’t troubled by Citi’s moves.

“Assuming their increase is reasonable and can be explained by limitations on bonuses, I really think the increase in the base pay is justified,” said Sung Won Sohn, an economics professor at California State University, Channel Islands.

Citi and other banks are likely reconfiguring their compensation to avoid losing talented workers to competitors. Some of the banks that received government loans during the mushrooming credit crisis last fall have already paid back their debt and are no longer subject to compensation oversight, among them big banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. Those no longer under the government’s compensation oversight are able to offer lucrative deals to entice employees away from other banks.

Citi has seen some defections from its ranks in recent months.