Big redundancy payments keep banks out of the employment tribunals
A survey by law firm Allen & Overy on the redundancy practices of 125 companies in different industries found investment banks were among the least likely to engage in collective consultation.
But they nonetheless suffered fewer law suits post-redundancy than companies in most other sectors.
Only 18% of financial services companies said they had industrial tribunal claims brought against them after redundancies, compared to an average of 22% of all companies.
In the retail and leisure sectors, half the companies had faced tribunal claims in the wake of lay-offs.
Collective consultation with employees has been required by law since 1999 for companies making more than 20 people redundant.
But investment banks have traditionally consulted on an individual basis only. Lawyers say staff have continued to accept this. They know a tribunal award would not usually increase the severance payments that they receive, which tend to be well above the legal minimum.
Stefan Martin, a partner at Allen & Overy, said: "It's unusual for financial services companies to offer only statutory redundancy. My feeling is they won't change because there is a perceived risk that employees could cause heavy losses for a bank, once they know they could be made redundant," he said.
The survey also found that the traditional "last in first out" rule was now rarely used as the basis of selecting people for redundancy. It was cited by just 14% of respondents.
The most popular criteria were skills (63%), performance (54%) and relevance to future business needs (50%).
Many firms are also taking a more flexible approach to employment generally, both to avoid redundancies and to retain valued staff. Some 29% of companies allow part-time working (24% in financial services), 22% offer secondments (24% in financial services) and 30% will retrain staff (22% in financial services).
However, banks are more likely than most to cut salaries in tough times. While 15% of firms in all sectors have imposed pay cuts, 22% in financial services have done so.
This is the first time Allen & Overy have run a survey on redundancy. "We had the highest response rate of any survey we have run," said Martin. "It's a sign of the times."
