HSBA Hsbc Holdings Plc

LONDON—HSBC Holdings PLC backtracked from a decision to freeze pay this year after employees pushed back to receive raises they had earned.

Chief Executive Stuart Gulliver wrote to staff on Thursday to say the freeze announced two weeks ago was being scrapped. Not everyone will get a raise in 2016, he said, but those who had won one as part of their annual pay review will.

The raises will be paid out of this year's bonus pool, Mr. Gulliver said in the memo. A spokeswoman said the bank is targeting significant cost reductions by the end of 2017, as outlined by the bank in a strategy update in June.

HSBC put the freeze on pay and hiring two weeks ago as a fresh measure to control costs. The bank, which is overhauling its global operations and exiting or shrinking its presence in dozens of countries, aims to shave up to $5 billion from its annual costs.

HSBC, along with rivals across the world, has seen its stock hammered this year as investors reset their expectations on how profitable banks can be even after they carry out major restructurings. HSBC has been relatively resilient, with its stock is down 21% this year compared with a 28% decline in the STOXX Europe 600 Banks index.

Amid the market volatility, HSBC's board will meet on Sunday to decide whether the bank should relocate its headquarters out of London. The long-awaited decision—which analysts expect will be for the bank to remain in London—is being made after the board reviewed the regulatory, political and legal implications of moving to another city such as Hong Kong or Paris.

Write to Margot Patrick at margot.patrick@wsj.com

(END) Dow Jones Newswires

February 11, 2016 08:05 ET (13:05 GMT)

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