Many Wall Street investment banking employees should see bonuses rebound in 2009 as earnings improve, a top pay consultant said, even as the government uses billions of dollars of taxpayer money to prop up the still-troubled industry.

The consultant, Johnson Associates Inc, said bonuses may rise 20 percent to 30 percent in equities and fixed-income businesses, as results improve in such areas as commodities, currencies, derivatives and interest-rate products.

Bonuses may also rise 20 percent to 25 percent for general staff, while executives not among the five highest-paid officials at their banks may also enjoy "significant" increases, according to the report, released on Thursday.

Other employees may fare less well, as unsettled equity markets and reduced merger activity cut into underwriting and advising fees, while market depreciation and client asset outflows cut into revenue in fee-dependent businesses.

Bankers involved in underwriting and merger advising may see bonuses fall 15 percent to 20 percent, the report said. Bonuses may drop 25 percent to 35 percent in asset management, 25 percent to 30 percent in "prime brokerage," 25 percent in wealth management, and 20 percent to 30 percent in hedge funds and private equity. Workers in commercial and retail banking units may see bonuses rise or fall by 5 percent or less.

Wall Street pay practices remain under close scrutiny after risk-taking contributed to soaring losses and a freezing of credit markets last September, when Lehman Brothers Holdings Inc <LEHMQ.PK> went bankrupt and insurer American International Group Inc <AIG> got its first federal bailout.

The hundreds of financial companies that got funds from the $700 billion federal Troubled Asset Relief Program are subject to pay restrictions that make it harder to compete for talent against smaller and non-U.S. rivals.

Some banks are boosting salaries to offset uncertainty over bonuses, Johnson Associates said.

"I don't think that as taxpayers, we should be telling banks how to pay their rank-and-file, because it gets us too far down into micromanagement," said Charles Mulford, a management professor at Georgia Institute of Technology in Atlanta. "The political environment and the difficult operating environment has made higher salaries more palatable."

Bonuses typically comprise the bulk of annual compensation for the highest-paid Wall Street employees.

Top executives at many banks including Bank of America Corp <BAC>, JPMorgan Chase & Co <JPM>, Citigroup Inc <C>, Wells Fargo & Co <WFC>, Goldman Sachs Group Inc <GS> and Morgan Stanley <MS> took no bonuses for 2008.

Johnson Associates said the ability to repay TARP will be a "key factor" in setting year-end pay. Goldman, JPMorgan and Morgan Stanley are among U.S. banks that have said they want to repay the government as soon as possible.