The Financial Conduct Authority (FCA) attempted to draw a line under tensions in the organisation over changes in staff pay.

Unions had been critical of plans by the financial watchdog to scrap bonuses for staff but the FCA has said this is to increase base pay for the lowest-paid workers.

The FCA said it would increase current proposed pay rises and give workers a one-off cash payment in recognition of the changes in the cost of living.

I understand the strength of feeling about some of the changes we are making. We have welcomed the open debate and discussion and, with the Board, considered all the feedback we have received.

Base pay will rise 5% this year, compared to previous proposals of 4%, and a 4% backdated cash payment will also be made.

However, the pay rises will only be rewarded to staff who hit performance-related targets, although those who miss them will be able to get partial uplifts at mid-year reviews, the FCA said.

Chief executive Nikhil Rathi said: “I understand the strength of feeling about some of the changes we are making.

“We have welcomed the open debate and discussion and, with the Board, considered all the feedback we have received.

“We believe we have developed a fair, competitive and sustainable offer that will help us achieve our regulatory objectives, as well as diversity goals, that supports the lowest paid and the strongest performers, with most colleagues receiving a minimum salary increase of over 9% over the next two years and an average of over 12% over that period.”

Unions had previously attacked proposals, saying it would leave some staff facing significant pay cuts once bonuses had been removed.

Unite asked for formal recognition from the FCA, although this was rejected and remains off the table.

Membership numbers were said to have increased but the FCA rejected suggestions there had been a high turnover of staff.

Attrition levels are at 13%, which is in line with historical numbers, according to the FCA.

As part of the offer, around 800 of the FCA’s lowest paid staff will receive average salary increases of £4,310 to bring them up to new lowest salary benchmarks.

With other salary increases and performance related pay, overall average increases will be around £5,500, the FCA said.