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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.
COMMENTSAnonymous, Derivatives, Tue 08 Jul 08Last In, First Out.... that's exactly what happened to us at UBS Add your comment »Anonymouse, Quantitative Analytics, Tue 08 Jul 08My old boss in a low-rent energy consultancy was an accountant. He had some very creative ways of cutting costs. The method went something like the following: If you don't pay your staff enough, they leave, thus saving you their salay. You continue not replacing staff when they leave (saving loads) until almost all the competent, high value staff have left, leaving only the really cheap dum-dums who can't be bothered moving...thus saving you absolutely tons!
anon, Trading, Wed 09 Jul 08name: Lehman brothers..!!! canned junior people all across the board. i wish they would go down
reluctant lawyer, Investment Banking / M & A, Wed 09 Jul 08Banking law beckons as it has for many of us from many of the dot-com 'banker' analyst days...it may be dull but its a living - and you don't get sacked! Add your comment »Henry, FX & Money Markets, Wed 09 Jul 08So you guys have so far named UBS, Lehman, BarCap, BofA and RBS. No 2 votes for either as I write this. No one bank is guilty of this, its common procedure. Nonetheless, if you are a grad and you get canned, no matter what you say, you deserved it. If 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. Add your comment »fxo man, Trading, Wed 09 Jul 08Have to say that i disagree with some of what Henry writes, but here he's spot on. Unless you're very senior and fall foul of big-time politics, GOOD PEOPLE DON'T GET FIRED. EVER. PERIOD. (unless they're guilty of serious misconduct etc, and even then, in my experience, unless the organisation has absolutely no option, for instance for reputational reasons, they're still kept on).
Redeploymentisafigmentofyourimagination, Debt / Fixed Income, Wed 09 Jul 08Henry - good at job, impress people that matter, and play cards right, that's the secret is it? One will be saved or redeployed? Wow, it's all so simple - thanks for your enlightened wisdom and telling people that if they try hard enough, they can reverse this credit crunch. Should I even bother asking how you impress people when you're a first year analyst working on a sponsors team or in CDO syndicate? Do you flash them your big unit? Will that do the trick? Tell funny jokes? I also like how it's so black and white in your little fantasy world (those who follow Henry's 3 steps will survive, those who don't get what they deserved). I suppose analysts in structured finance should have played their cards right and simply started on a different desk after graduation. With your wisdom, knowledge and savvy, you should be able to beat Paulson's subprime trade, but for some reason I think you're all talk. Add your comment »bondgirl, Debt / Fixed Income, Wed 09 Jul 08the reason why pay is so good is because there is NO job security.
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