Why Goldman Sachs might want to employ people in Singapore instead of London
There is no guarantee that Goldman Sachs' putative hiring in Singapore will have negative repercussions in Fleet Street. But it might.
As we have observed in the past, cutting in London looks like the perfect counterweight to expansion in Asia.
Briefly: European banking revenues are stagnating and salaries in London are high. At most banks, Asian revenues are increasing, but more slowly than Asian compensation. New employment in Asia therefore needs to be offset by new job cuts elsewhere to maintain compensation ratios.
In the case of Goldman, elsewhere could easily be Fleet Street. The average employee at Goldman Sachs International (its European business based in London) earns more than twice the amount of the average employee globally. Rumour has it that some senior people at Goldman in London are now on salaries of 1m.
By comparison, Singapore is cheap. But this cheapness is related to taxation rather than compensation.
According to the Robert Walters salary survey, pay inflation in Singapore is running at around 33% a year in some areas of investment banking.
As a result, Robert Walters says analyst and associate level investment bankers in Singapore are on salaries of $120-$200k (60-101k). This compares to an average salary of around 110k for third year associates at Goldman in London.
However, while Goldman would need to pay employer's national insurance of more than 14k a year on an employee earning 110k in London, the same employee earning the same amount (as a resident) in Singapore would incur an employer's national insurance cost of
Moreover, while employer's national insurance in the UK rises with compensation, employers' NI in Singapore is capped at 4k no matter what. Therefore, while Goldman would need to pay 137k a year in employer's NI on a 1m employee based in London, in Singapore it would pay 97% less.
Faced with such a discrepancy, the appeal of Singapore looks fairly simple.
