If your bills are mounting by the month and you worry about your job security, you are probably less than ecstatic about the astronomical bonuses that are awarded in the City.

The banking crisis has created a backlash and the bonuses are being blamed for the short-term behaviour of some bankers. The planned government bailout in the United States is expected to include limits on executive pay, while in Britain ministers have suggested that the Financial Services Authority could scrutinise bank remuneration structures.

Within the industry, however, most people believe that the City's bonus culture will carry on and that leading players will continue to command headline-grabbing earnings.

Richard Boggis-Rolfe, the chief executive of Odgers Ray & Berndtson, the headhunter, said: “I don't believe that any business sets out to pay its people any more than it needs to. I realise, particularly in these sorts of times, when people are suffering and people can't pay their mortgages and there's unemployment rising, that seeing these enormously high bonuses might offend people - but the only reason businesses are paying these sums is because they believe, rightly or wrongly, that they need to pay it to attract the right people. It is, quite frankly, a market.”

Overall, bonuses are expected to dip this year and, in the longer term, may account for a smaller proportion of bankers' pay. Phil Sheridan, UK managing director of Robert Half, the recruiting consultant, said that bonuses have accounted for up to 60 per cent of pay but that that could contract to 25 per cent to 30 per cent. He advocates the linking of bonuses to long-term performance, perhaps in restricted stock.

Richie Alder, a partner in Trowers & Hamlins, the City law firm, criticised the long-term approach. “The FSA and the Government are hoping to put pressure on banks to impose longer-term bonus schemes as a way to reduce risk-taking,” he said.

“However, they can expect to meet resistance from employees who view Lehman's collapse as evidence that the industry is too volatile for bonus payments to be deferred too far into the future. However much banks might like to defer bonus payments in order to improve cashflows, those vying to recruit the best money-earners may find that these employees will be more worried than ever about seeing their bonus pools disappear overnight.”

Ironically, some of the managing directors of Lehman Brothers look as if they will be among the best-paid executives in the industry, with Nomura promising to pay bonuses at 2007 levels, in cash, for the next two years.

John Benson, the chief of eFinancialCareers.com, said: “We think bonuses will be down across the board by about 40 per cent, but, as a general rule, the banks and financial institutions will still need to keep happy those areas of the business that are doing well. It is, and remains, a very, very, very competitive market and skilled bankers are very mobile and think nothing of moving between firms and between types of firms, and many are also very geographically mobile.”

People likely to receive the highest bonuses this year are thought to be those working in foreign exchange and interest-rate trading, energy and commodities and some proprietary trading. Mr Benson said: “Banks will need to continue to pay good bonuses to star players, who they will otherwise lose. And there is no point us getting worked up about it - that is the nature of the market. And we, as a country, want them to remain here and continue doing what they do here, because they pay an awful lot of tax.”

Bonus spending habits

— Of those who earned a bonus, 26 per cent kept the money in their current account and used it for day-to-day expenses

— Nearly one in five (19 per cent) used the bonus to pay off debts

— 37 per cent of women put their bonus in a savings account, but only 25 per cent men did so

— 22 per cent of those that earned a bonus saved it for something special, such as a holiday or house. Again, more women (28 per cent) than men (17 per cent) did this

— Only 10 per cent of people said that they spent their bonuses on luxury items

— Only 7 per cent know how much to expect and use it as part of their wages

— Some 5 per cent said that they had no idea what they did with their bonus

Source: A survey of 2,010 people carried out by Opinium Research for the online financial services firm Kaupthing Edge

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