Is this the end of the mega bonus?

With banks going into the remuneration-setting period for 2009, having a chief executive forgoing their bonus seems to be the new black for this year's Christmas party season. But banks and other City institutions will continue to try paying bonuses to their other staff and management, although they should not expect much next year.

Goldman Sachs said yesterday its senior executives were waiving their right to a bonus for 2008. The New York-based company has had to become a more traditional bank holding company to appease US regulators, which is one factor in the thinking. "They believe it's the right thing to do," said a spokesman for Goldman. "We can't ignore the fact that we are part of an industry that's directly associated with the ongoing economic distress."

The seven executives, who include the chief executive Lloyd Blankfein, will just take their $600,000 (£400,000) base salaries. Other companies whose boards have made similar undertakings include Royal Bank of Scotland and HBOS, both of whom have had to resort to taking government cash to stay afloat.

But going furthest so far as the domino-effect spreads is UBS. One of the banks worst hit by the credit crunch with multiple writedowns and job cuts in recent months, the Zurich-based bank said its chairman Peter Kurer, its chief executive Marcel Rohner and other executive board members would not get any bonuses this year. But the bank also added that, starting from 2009, top managers' bonuses will be blocked for at least three years instead of being paid immediately and there will be a clawback clause whereby they can be paid back if results or performance deteriorate.

Another US giant, Citigroup, which announced yesterday it will cut 52,000 jobs from its September levels, is also positioning itself for such a move. Its chairman, Sir Win Bischoff, did not rule out the likelihood its leaders would go without bonuses this year. "Watch this space," he said.

Good PR demands such moves, because of the political storm over banks' role in the credit crunch, as well as the fact that many have resorted to taxpayer handouts, with conditions banning cash bonuses attached. "There is a feeling that after all that has happened there needs to be some contrition or payback; an example shown," said one investment banking public relations adviser.

But some other banks that have had to raise capital may not follow. Top executives at Lloyds will still get bonuses – if only in shares. Barclays, whose chief executive, John Varley, has said he does not expect a bonus next year, has not ruled out paying them to its other top executives who include its president, Bob Diamond, one of the best-remunerated executives in the City. And HSBC has yet to announce any bonus-dodging among its executives, although it has come off a lot more lightly than the other banks from the current financial meltdown.

But while the gesture of top brass forgoing their bonuses is noteworthy, historic levels of remuneration mean that none of the executives are likely to go hungry any time soon.Mr Blankfein, for example, got a bonus of almost $70m earlier this year for the record boom year that was 2007. And the move also props up bonuses for those chasing them in the rest of the firms. Employees further down the hierarchy may in fact get slightly bigger bonuses, as whatever the top executives forfeit stays in the bonus pot for the rest of the firm.

There is another reason executives may find choosing to forfeit their bonuses to be a good idea – they will be able to go back to taking bonuses from next year and if there is one year they are not missing much, it's probably this one.

With hundreds of thousands of jobs cut in the financial services industry in London and New York as profit plunges, the last thing staff at investment banks, hedge funds, fund managers and other City firms are waiting for or expecting is a big bonus. And while banks will continue to offer their highest performers bonuses, job security is as high as most City workers are allowing their hopes to go at the moment. "The bonus this year is keeping your job," said one employee at a major fund management firm.

Bonuses are meant to keep staff from being poached by rivals. But with very few hirers in the financial services sector at the moment, banks are little tempted to pay them out widely. And with bonuses set in relation to bank profit and revenue, the amount available for the payout has also shrunk dramatically. "People's priorities this year are very clear – it's to hold on to their jobs," said Amber Rudd, who runs Lawnstone Limited, a financial headhunting firm. "I can tell you expectations are very low – being City types, they know what is going on in the markets."

Fund managers may also have trouble getting the salaries they are used to. With most of their performances in 2008 atrocious, it is unlikely they will be rewarded with any performance-related bonus. And the problem is especially acute for hedge funds. Investor redemptions and banks cutting their loan facilities have dented their profitability.

Ironically staff at the now-defunct Lehman may be among the best-rewarded employees this year. PricewaterhouseCoopers said last week it will pay salaries and bonuses in line with 2007 levels to the 1,100 or so staff it is retaining.