Redundancy payments are on a downward curve

The difference can amount to tens of thousands of pounds even for middle-level employees. Linda Jackson, managing consultant of the outplacement firm Penna Meridian, said that in many cases redundancy payments had fallen by half as banks tried to cut costs.

"Last year some firms were paying six weeks salary for every year of service," she said. "The average has come right down. I know of one bank at the moment that is paying just two weeks salary."

Petra Rickmeyer, a headhunter at Hoggett Bowers, said: "There is a certain amount of brutality creeping in. Some firms are giving the minimum they can get away with."

The cuts could lead to an increase in lawsuits. One corporate financier said he was considering taking legal action because he believed he should have been paid an extra 50,000 (€78,500).

But suing can be difficult. Banks justify lower payments by pointing out that they are stated to be discretionary, rather than contractual. This applies to redundancy payments, which are usually based on length of service, and to other ex gratia payments, which are often related to bonuses.

UBS Warburg told staff at the start of this year that it was reducing some severance payments as it believed they were over-generous compared with competitors. It reminded them that it continued to pay above the legal minimum.

The bank declined to comment. It is understood that redundancy pay for some long-serving employees has been affected, though a policy of giving most staff four weeks salary for every year of service is unchanged.

Other ex gratia payments are often the first to disappear as banks cut costs, because they have always been more variable than redundancy pay. As bonuses for existing staff fall, banks feel entitled to cut payments for those who are leaving.

But lawyers say some employees are still receiving big severance packages, as banks want to avoid creating large numbers of disgruntled ex-employees, especially at senior levels. The banks' desire to avoid lawsuits also gives departing staff negotiating power.

One large bank is understood to be favouring redundant staff over those who keep their jobs as it decides what to do with this year's bonus pool. The thinking is that those who remain in employment can at least rely on a regular salary.

Employees may have several grounds for suing banks over severance pay, including arguing that the selection for redundancy was unfair in the first place. Staff may also claim their employer made too little effort to find them another job internally.

Another route is to argue that discretion in awarding a payment is not absolute, simply because an employer says it is. A trader successfully used this argument in the High Court in Clark v Nomura in 2000, winning 1.35m; but the case was decided on particular facts and may be of little use to many now being made redundant.