When the business floats on the stock market later this month, all non-executive staff will have their pay decided under a scheme called the TSB Award.
In a move that mirrors the John Lewis model, all employees will receive shares in the company to the value of £100. Bonuses will be capped at 15% and will be based on customer service metrics.
However, all executives will be able to earn double their basic pay in a separate reward structure named the TSB Sustainable Performance Award. As a result chief executive Paul Pester could potentially receive a package totalling £1.68 million.
Pester defended his total remuneration package, despite admitting it is “a lot of money”. He said that in reaching their decision, the board had considered “the responsibility that comes with looking after banking for 4.5 million customers, looking after £20 billion worth of customers' money and actually bringing a bank to the UK that is different.”
TSB chairman Will Samuel said the package reflected the work at all levels of the bank’s employees.
"We believe the new policy strikes the right balance in rewarding sustained performance and high levels of conduct over the longer-term, whilst retaining and motivating TSB's excellent workforce,” he said.
Economic secretary to the treasury Andrea Leadsom backed the bank’s reward structure.
“Its fresh approach to remuneration and the creation of partners in the business is an example of how increasing competition in the banking sector incentivises banks to come up with new ideas and create more attractive products and services,” she said.