The bankers’ dilemma: moving jobs won’t achieve a higher bonus. Nor will a promotion
Post-bonus job-hopping is fuelled by investment bankers feeling short-changed and looking for a bigger package elsewhere. However, switching jobs doesn’t automatically equate to a bigger bonus, and nor does sticking with your current employer and hoping for a promotion.
Globally, an average of just 12% of the nearly 2,700 investment bankers responding to the eFinancialCareers bonus survey said that they increased their bonus by switching companies. Meanwhile, just 4% cited changing jobs within the same organisation as the main reason for an uplift.
Guaranteed bonuses have not generally been on offer to investment bankers in recent years, but taking a new position is not entirely a gamble. Jon Terry, partner in the compensation practice at PwC, says that “conditional guarantees”, where a predefined bonus payment is offered provided the employee meets certain performance criteria, are still “prevalent”. “There’s greater discrimination about who is offered the prospect of a bigger bonus and only those who are expected to add value to the firm – a smaller and smaller group – are offered conditional guarantees.”
There remains a pervasive sense that moving to a new employer will equal a larger bonus the following year, however, says Andy Pringle, managing director of headhunters Circle Square: “There’s an ongoing sense of naivety around switching jobs after bonus payments. In reality, you’re only going to get an increase if you’re switching from an underperforming business into one that’s expanding or you’re moving from a boutique to a bulge bracket bank.”
Fewer people are looking for a new position after bonuses, however, and there are lower expectations around variable pay than during the pre-crisis years, believes Andy Dallas, associate director at Robert Half Financial Services. Its research suggests that 37% of banking CFOs reported an increase in voluntary turnover after bonuses in 2013 – a significantly smaller proportion than in previous years.
“The prevalence of deferred, staggered and contingent convertible bonus payments as well as increased base salaries has had the triple effect of offsetting risk and providing capital relief to institutions while also decreasing employee turnover,” he says.
While a promotion will mean an increase in base pay, an automatic rise in bonus payments doesn’t always happen, believes Terry: “There’s an emphasis on personal, rather than company or divisional, performance when calculating bonus payments. Getting a promotion offers the potential for a bigger bonus, but your performance targets have been recalibrated and are harder to hit.”