Senior contracts 'must have failure clause'

Those involved in hiring senior employees in the financial sector have been advised by a law firm to make sure their contracts do not reward staff for failure.

Tom Flanagan, employment partner at Pinsent Masons, explained that "the time may have come" to rethink the way employment contracts for finance jobs are structured.

His comments come after reports emerged that senior staff at Northern Rock received bonuses regardless of the poor performance of the bank.

"Most people would not object to high rewards for those who create wealth and otherwise achieve - but not for simply being there and certainly not for failure," remarked Mr Flanagan.

He added that although firms are right to reward those who have achieved something remarkable, it is important to make sure employment contracts reflect the "reality of the role".

In February, the National Audit Office said that it would launch a forensic investigation into the rescue of Northern Rock, examining all aspects of the bail-out.