Bankers beating the bonus time blues
CHIEF OPERATING OFFICER, ASTBURY MARSDEN
WITH investment banks coming under increasing pressure from the government and City shareholders to cut or even cancel staff bonuses, what effect will this have on resignations during this year’s bonus season?
The intense and acrimonious debate around Stephen Hester’s bonus shows that the subject is still far from closed. There is, as yet, no consensus between City employers, the politicians and regulators that subject those institutions to so much scrutiny and shareholders over what is a fair level for bonuses.
Human resources departments and managers at investment banks are now between a rock and a hard place, with pressure to trim or cancel bonuses and at the same time the need to retain staff for the long-term.
When bonuses are poor City employers rightly worry that a high level of staff resignations will follow – as employees decide they are just not valued. But this year there is some good news for banks. We surveyed 1,360 City professionals and found resignations will be less of a problem after this year’s bonus round.
Our recent research suggests that there has been a shift in sentiment and that there will be a far lower number of staff resignations during this year’s bonus season. A year ago 48 per cent of workers said they would try to change employer if they were disappointed with their bonus. This year the figure has dropped to 33 per cent. Indeed, 12 per cent of workers are not expecting a bonus at all.
Pay and bonus expectations among City staff became more conservative as 2011 progressed from spring to summer, and the number of investment bankers who are confident about their bonus size is falling by the day. The banks themselves have done a very good job of explaining to their staff why bonuses will be low for everyone. They have effectively managed staff expectations in advance of the bonus season.
With a general gloom in the City and redundancy programmes widespread, bankers are fully aware of the economic outlook and are now more likely to pursue routes other than resigning to keep their overall pay in line with their expectations.
However, London based banks and politicians must tread carefully as, despite the drop in anticipated resignations, there are still those workers who will look for job opportunities overseas.
11 per cent of bankers we surveyed said they would consider moving to an overseas financial services centre such as Hong Kong or Singapore if their bonus was disappointing.
Even with the cooling of the markets in the Far East there is a continuing flow of talented City workers from London to the region not least because many staff relocating there can achieve a higher take home pay. In London, taxes are far higher than in Asia and this, combined with a greater regulatory and government scrutiny of banks’ remuneration packages, is never a good recipe for retaining a highly motivated, cosmopolitan, multinational labour force in London.
Many of the best and brightest of those working in the City have few ties to the UK outside of their job – they are far more mobile than the talent that flooded out of the UK in the 1970s brain drain.
On the whole, we anticipate there will be fewer bonus related resignations among banks over the next few months and a less traumatic and disruptive experience for employers than in previous years. But there is a slower burning problem for banks in London, and for taxpayers that own some of them. If bonuses are suppressed below international rates then the City will find it harder to attract the best and brightest from countries such as China and Singapore and will continue to lose staff from London to those locations.
Mark Cameron is chief operating officer of financial services recruitment firm, Astbury Marsden.