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TOP STORIESWhy it makes sense to junk juniors8 July 2008COMMENTSIf you were good at your job, impressed the people that matter and play your cards right, you won't be canned, period. No matter what headcount chops are needed you'll be saved (maybe redeployed) if you're worth it. Read all comments »Why would anyone with an inclination for cost cutting dump a lowly analyst? Analyst pay is relatively insignificant, so in times of cost constraint they should be impervious to layoffs.
Sadly, this doesn’t appear to be the case. While first-year analysts are usually immune to the chop for political reasons (banks don’t want university students to hear that their immediate predecessors have suffered a nasty fate), second and third years are getting canned just like everyone else. Fixed costs associated with each unit of headcount are to blame.
“There’s a massive central overhead,” says an ex-derivatives trader. “This means that at a junior level banks have an incentive to get rid of people, not because of salary savings, but because of savings in the cost of office space, security, etc.”
Andrew Pullman, MD of People Risk Solutions and a former head of capital markets HR at a European bank, says desk space alone can cost around £6k per head; a Reuters terminal can cost around £5k; and HR amounts to another £5k per person.
Once things like compliance, IT and other operational costs are factored in, the head of HR at one US bank in the City puts the total ‘seat cost’ at anywhere from £50k-£75k. Additionally, employers’ national insurance contributions and benefits packages swell direct compensation costs by around 25%.
Before bonuses are even thrown into the equation, banks are therefore able to shave as much as £130k from the bottom line every time they get rid of a second-year analyst. Dumping junior bankers suddenly makes a lot of sense after all.
COMMENTSWizard of EC1, Research, Tue 08 Jul 08What rubbish, just because you fizz someone does not mean you save on the 'seat cost' - the Bank still pays the cost no matter what, the cost is only displaced to another cost centre. It’s an old trick to fool the gullible, but the old hands know that the Bank is still coughing up for all those empty seats, idle phones and leased computers. Also, will the HR cost of 5k be saved, no, the HRBP will still be there. Now..... if you really want to save some money, cull some MDs - lavish office space, telephone number bonuses, private restaurants, car parking, first class travel …… I'd rather fizz one MD and keep 10 hard working juniors any day! Add your comment »Dunbankin, Student, Tue 08 Jul 08No wonder HR costs as much as the desk space. No sooner have banks recruited zillions more suits than can find darts to throw, they realise they can't add any value and sack them again. Isn't the real reason for laying off junior people (or anyone for that matter) that every employee on a bank payroll is one more pair of hands to **** away someone else's money? Add your comment »Last In, First Out, Capital Markets, Tue 08 Jul 08One thing is worth mentioning here is the following: The firm I work for fired first year analysts less than a month ago (in fact, they did not complete even there first year of experience) and then it is expecting more than 150 new graduates in 2 weeks' time. Last week, more than 200 interns bombarded the trading floors and the IBD offices with literally nothing to do . In my opinion, this firm is not saving money by cutting analysts who cost it a lot of money training them and then get huge number of interns and new graduates who will cost it more than what the fired analysts would cost...these firms think only about their image Add your comment »Glorious, Credit, Tue 08 Jul 08Juniors might work hard but only if there's anything to do at all. By definition, they also know less, have less contacts, are less internally and externally connected and will not generate any business until 6-7 years down the line. Makes a lot of sense that they're cannon fodder. I was a 2nd year M&A during the dot.com crash and got canned. Pretty harsh at the time, but I understand it now. What this article does not say is that if there is really no business at all, every one gets the boot. No matter whether they're head of something or mere graduate. Add your comment »adityabhagat, Tue 08 Jul 08Ummmm...a case of stating the bleeding obvious? Seriously, how many of us did NOT know that there is a 'seat cost' associated with each of us employees and what that roughly works out to...Elementary, my dear efinancial... Add your comment »Moresensethanmoney, Hedge Funds, Tue 08 Jul 08Well said Wizard. Not one of the MDs that I ever worked around actually did anything of any value. These "lavish" titles like: Vice President and Director are handed out like water at the same time boosting the salary - yet few of the people have done anything Presidential in their whole lives. At least Analysts, analyse.
Anonymous, Investment Banking / M & A, Tue 08 Jul 08I got canned by my firm just one month short of my first year. Was told by some that analysts costs are low but when they are canning a whole lot it can save the bank money. I only fear now I won't have the experience to land another job due to market conditions and lack of experience. Add your comment »robby7712, Tue 08 Jul 08While I fully agree that MD's usually did sod all in their big glass boxes, I guess many of them have paid some dues to get there and feel they can put the feet up up. Its not correct but a lot did their hard time on the floors. Add your comment »an ex-ex-analyst, Capital Markets, Tue 08 Jul 08Are any ex-anaysts inclined to name and shame their ex-employers? It would be nice to hold them accountable if they are indeed laying off analysts so soon after recruiting them (and promising them the world at the time). Add your comment » |
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