Recruitment firms gear up for spring revival

Recruitment firms believe the 2004 bonus round will give them their best business for three years. Their most active period should be from February to April, when bankers traditionally rush to move jobs the second after their bonus has hit their bank accounts.

Pickings were slim in 2002 and 2003, when staff had few chances to move because banks were not recruiting. This year headhunters say banks are signalling they will be back in hiring mode.

Many recruitment firms are preparing for the extra business by hiring more staff themselves for the first time in years.

Simon Gee, managing director of Heywood Associates, which finds consultants for recruitment firms, said: "Many firms are looking for staff at the moment. There has been a noticeable increase in hiring in the past three months."

Some firms are going about it in unorthodox ways, reminiscent of boom-time recruiting. One City of London headhunter sent an e-mail seeking more staff to most of the people in his address book, or so it seemed - including a journalist. It read: "We are anticipating growth in sales and headcount. If you know anyone (friends, friends of friends, relatives and so on) who is looking for a bright, successful company, please forward this e-mail to them. Most importantly, I will pay 1,000 for the introduction of someone we employ."

Apart from 1,000 (€1,430) seeming a tad on the low side, this method of finding staff has drawbacks. The headhunter got a reply from the father of a former girlfriend.

It also sets a dangerous precedent because if professional recruiters do their own recruitment like that, then banks might do the same. They would then have no need for headhunters.

However, the e-mail reflects the zeitgeist. Jonathan Hawes, a consultant in derivatives sales and trading at Penna, another recruitment firm, confirms the changing mood. "The market is as busy as it has been for two and a half years. It has moved quickly from bust towards boom, though not quite to boom itself." Hawes should know. At the start of 2003, he spent most of his time as a Penna outplacement consultant, helping bankers who had been fired to find new jobs. By the end of the year it was his recruitment skills that were most in demand and there was less need for outplacement advice.

In Frankfurt, Andreas Halin, a consultant at Spencer Stuart, said: "The market is coming back. Since early November we have been getting more big mandates in equity capital markets. The improvement is about three months behind London, but it is finally happening."

Denis Marcadet, chief executive of Vendôme Associés in Paris, said more hiring was under way. He said: "Banks want senior staff in most areas, 35 or 40 years old, as they have recruited few for two years. Derivatives and convertible bond sales staff are in demand, together with leveraged and mezzanine debt experts."

The shares of recruitment firms outperformed the market as a whole last year, suggesting investors also believe good times are returning. In London, the mid-market firm Robert Walters was up more than 100%, while rival Michael Page rose more than 70%. Whitehead Mann, which handles senior searches, nearly tripled its share price.

Recruitment firms could be over-optimistic about banks' hiring plans. The Centre for Economics and Business Research, a think-tank, has estimated that the number of staff working in the securities industry in London will rise just 2% in 2004, while in corporate finance the figure will be 1%. Staff numbers in fund management will fall 4%.

George Wilson, head of human resources at Rothschild, said: "There will be no return to the boom and bust hiring that some banks did in the 1990s. A pick-up is likely in 2004 in many sectors, but it will be controlled." Many banks said their staff numbers fell significantly over the past year, by 11.9% at Goldman Sachs and 12.9% at JP Morgan, for example. However Goldman Sachs said the figure stabilised in its latest quarter.

However, if much hiring takes place in 2004, recruitment firms may not benefit as much as they expect. Most will be hoping to raise the fees they can charge, which have shrunk severely during the downturn - often to less than a quarter of a senior employee's annual pay, compared to a third in the 1990s. Banks are determined to resist any increase. Wilson said: "I don't think fees will rise for a while, if at all. Recruitment firms need to concentrate on recapturing clients more than anything else."

The head of HR in Europe at a large US bank said a shift was under way in how banks make use of recruitment firms.

At managing director level they needed them as much as ever, but for lower positions they are increasingly turning to other means, such as recruiting direct.

He said: "We have so many good CVs arriving unsolicited on our desks that we are hiring more people that way. We also advertise more jobs ourselves on the internet."

In October, Lehman Brothers offered staff a $10,000 finder's fee if they introduced a new member of staff. Such inducements have already been working well at other banks, though it is used with caution. It can lead to people hiring their friends, or putting forward unsuitable candidates simply to earn the fee.

Recruitment firms have a long way to go if they are to recover from the downturn.

A survey of executive search firms by Heywood Associates in the UK showed that in the year to November 2003 their fee income fell between 7.5% and 25%. Front-office consultants typically earned 60,000 to 95,000, which Gee said was significantly lower than the year before. Human resources staff have plenty to think about apart from recruitment.

For example, in the UK changes to employment law in April gave women more generous maternity leave.

They were also given a new right to ask employers how much male colleagues are earning - the employer need not reply, but if it fails to do so a tribunal may conclude it has something to hide.

In November, laws against discrimination on grounds of religion, belief and sexual orientation came into force for the first time. Lovells, a City of London law firm, held a seminar for bewildered human resources staff to explain the impact.

They learned that it is unclear whether druids would be protected by the legislation on religion. However, sado-masochists do not appear to be protected as their practices amount to sexual behaviour rather than an orientation.

As for what is meant by belief, Lovells said no one appears to have the slightest idea, least of all the UK government.

Disgruntled employees will no doubt use the tribunals to find out. Human resources staff can look forward to some fascinating discrimination suits in 2004.