The average Wall Street worker will see his bonus fall by 20-30 percent this year as compared to 2010, said compensation consulting firm Johnson Associates in its annual compensation analysis report on Tuesday.
According to the report, employees in bond trading will face the biggest decline in their bonuses, with pay cuts ranging from between 35 to 45 percent from last year. Equity traders and senior executives, on the other hand would see cuts of up to 30 percent, while investment bankers would lose bonuses of up to 20 percent this year.
"The lack of economic recovery, combined with ongoing uncertainty in the world markets, and global and regional regulation are driving most financial services firms to significantly reduce the size of their bonus pools," said Alan Johnson, managing director of Johnson Associates, in an interview with Reuters. "As a result, most, but not all, professionals will receive smaller payouts this year."
Johnson added that this would be the second time in four years that Wall Street professionals would see a far lower year-end incentive payout as compared to the previous year.
In 2008, average year-end bonuses on Wall Street declined sharply during the height of the financial crisis as numerous firms faced massive losses, or in some cases, even bankruptcy. However, over the last two years, Wall Street bonuses have seen a massive rebound, leading to widespread dissatisfaction as demonstrated by the Occupy Wall Street movement.
While traders, bankers and top executives on Wall Street typically receive base salaries of $100,000 to $1 million, most of their income comes from year-end bonuses that are based on individual and company-wide performances. According to the Washington Post, the majority of Wall Street workers will still earn more from their bonuses as compared to their base salaries this year, despite the potential paycut.
Last month, Goldman Sachs reported only its second ever quarterly loss in its entire history as a public company, while Morgan Stanley and the investment arm of JPMorgan Chase & Co posted sharp declines in third-quarter operating earnings before an unusual accounting gain.
In the first nine months of this year, Goldman, Morgan Stanley and JPMorgan's investment bank set aside $30.4 billion for compensation and benefits, down by 7.8 percent from 2010.
The upside for Wall Street workers is that two business lines in the financial industry may see slightly higher pay this year – retail banking as well as divisions that deal with high net worth customers. According to the Johnson report, bonuses for commercial and retail banking will fall between the range of negative 5 percent and 5 percent, while bonuses for workers who service high net worth individuals would fall anywhere between 0 to 5 percent.
Related: Wall Street to Cut Bonuses in 2012