Lloyds Banking Group's spin-off TSB said its 8,600 staff will each receive £100 of shares and become "TSB partners" when the business floats on the stock market this month.
TSB set out its new policy, including remuneration details for chief executive Paul Pester, who will receive an annual pay package of up to £1.68m – 65 times the average pay of non-managerial staff at the bank.
The policy is said to be modelled on the John Lewis partnership and the £100 share award will apply to all staff, including Pester and the chief finance officer, Darren Pope.
TSB, which is trying to set itself apart from the Big Four banks, which include Lloyds, said senior executives' pay will be capped so that bonuses will not outstrip salaries. The cap has been set by the Prudential Regulatory Authority and the EU.
Pester said all staff were to become partners in the business because TSB was keen to shift its focus from product sales toward customer service. "I believe a sense of shared ownership amongst TSB staff is key to delivering a consistently great customer service – and to building a thriving TSB bank."
TSB is replacing its existing bonus structure with two new schemes after consultation with staff and trade unions. The TSB award is an annual performance-related bonus, payable to anyone from CEO to frontline branch staff, and will normally be capped at 10% of salary but can be increased to 15% for outstanding performers.
Its sustainable performance award will range from 25-62.5% of salary for "on-target performance", and 35-100% of salary for outstanding performance.
After the IPO, Pester's salary will rise to £700,000 from £600,000, frozen until 2016, plus benefits worth £177,500. "Even after accounting for this increase, he will see a material reduction in his maximum potential earnings," TSB said.
He is in line for bonuses worth up to £805,000 "for outstanding performance". If the company's performance is simply on target, he will get variable pay of £507,500, out of a total package of £1.385m.
Pester will also get a one-off cash payment of £405,000 after the first anniversary of the float, and holds 2.8m shares granted by Lloyds, which are due to be vested over the next three years and are worth £2.2m at the current share price of 78.3p, plus £108,100 to be converted into shares.
The TSB chairman, Will Samuel, said: "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."
The pay policy has been endorsed by TSB's remuneration committee, chaired by Dame Sandra Dawson.
