Bank staff earn thousand of pounds by finding new employees
With bonuses likely to be low in 2002, bank staff can be forgiven for wanting extra cash. Enticing friends to take a job with their employer can be one way of earning it.
A total of 80% of investment banks operate a scheme to encourage their employees to find new members of staff, according to a survey by the human resources consultancy Penna.
City of London employers are paying between 500 and 15,000 to employees who successfully refer friends, former colleagues or anyone else that they know about. The bounty paid often depends on the earnings of the person hired.
Currently 12% of staff are hired through this method, the survey found.
Employee referral schemes were popular with banks during the boom years of the late 1990s, when staff were hard to find. Employees at dotcoms were also paid for referring scarce IT and other staff.
After the redundancies of 2002, the schemes are still popular with the banks because they save money in cost-conscious times.
Michael Moran, executive director of Penna's City office, says that by eliminating recruitment firms, banks can save many thousands of pounds per hire.
'It's all about getting your own staff to market you to the outside world', he says.
Referral schemes could play a bigger role in future, says Moran. Some banks are hesitant to promote them while they are making layoffs, in case it seems insensitive.
Many headhunters are disparaging about such schemes. Andrew Lowenthal, head of financial services at Egon Zehnder, said employee referrals lacked objectivity.
'Saying, 'I know someone who's lost his job or isn't happy where he is,' is not the same as asking a search firm to come up with the 25 best people in the industry,' he says.
Referrals are also accused of encouraging cronyism. A former employee of a large European bank said the scheme provided an incentive to hire sub-standard staff:
'It can be hard to turn down a candidate when you know a colleague will make $10,000 if they are hired,' he said.
