Front office staff hiring slows

Senior front office staff looking for a hefty increase in salary and generous guaranteed bonus need to change job soon. Banks' appetite for buying out costly revenue generators is starting to ebb.

"We will slow hiring down to a snail's pace when it becomes economically unviable," says the head of recruitment at one US bank in the City. "This usually happens in May or June."

Hiring is rendered unviable because anyone who quits one bank for another midway through the year will lose their entitlement to the annual bonus. To soften the blow, hiring banks typically compensate new recruits for the loss, by paying the annual bonus in full - even if they've only been working there for a few months when bonuses are paid between December and March.

"If you bring a new person into the team in October, all you're doing is putting pressure on the bonus pool for the rest of the employees," says the head of recruitment.

The seasonal slowdown in front office recruitment is nothing new, but he says it's been exacerbated this year by banks' penchant for extending notice periods from one to three months or even more: "If you attract someone at the end of May, they're not going to start until September. In most cases, that just won't work. The window for making economically viable hires has become a lot shorter."

Last November, Morgan Stanley extended notice periods from one to six months for managing directors and from one to two months for executive directors. Merrill Lynch is also understood to have extended notice periods for some of its staff from three to six months.

The slowdown in front office hiring is reflected in the latest report from recruitment firm Morgan McKinley. Although new jobs in April were up more than 20% on the April 2005, it found recruitment increasingly shifting to middle-market staff, where salaries rose 4.6% between March and April alone.

Rather than a reflection of banks' seasonal unwillingness to buy out front office bonuses, Robert Thesiger, chief executive of Morgan McKinley, says growing demand for mid-ranking staff is down to having filled senior roles already: "In busy market conditions employers tend to focus on their senior level hiring requirements first and then shift their attention to the next level down later in the year."