The truth about the banking pay premium

Investment banks are preaching prudence over pay, but this has yet to filter down to their employees, the majority of which would expect a pay rise of up to 30% in order to be prised out of their current positions.

Over 40% of middle office professionals responding to the eFinancialCareers retention survey said they would expect a pay increase of between 20-29% in order to move positions. The largest proportion of both front office (32%) and back office (38%) also said they would expect this amount when considering switching employers.

“Most people expect a material uplift in compensation when switching positions, which is natural because they would have to re-establish their network and credibility at a new employer,” says Jon Terry, partner in the compensation practice at PwC. “The reality is, however, that only the top performers or those in parts of the business where their roles are highly-sought-after can command a significant premium.”

Perhaps predictably, therefore, after years of surging demand for risk management and compliance professionals, middle office employees are most confident of receiving an uplift.

However, in the UK, it’s the front office where pay expectations are highest.  Nearly 44% of front office employees in the City said they would expect a 30-39% increase in pay in order to move positions. The largest proportion of front office respondents on Wall Street (33%), expected a 20-29% uplift in compensation to move employers.

Despite the recent pick up in recruitment in investment banking advisory functions in 2014, traders continue to face shaky job prospects as banks retreat from fixed income. Perhaps this expectation is more reflective of the risk premium when switching employers than an inflated sense of their own abilities. Or, maybe, most people think of themselves as the highest performers deserving of a large pay increase.

“Organisations are focused on keeping the people they need to keep and getting rid of the dross,” says Chris Roebuck, former global head of talent management at UBS and visiting professor at Cass Business School. “This means they will pay an increase of up to 20% for top performers and for those roles they need to urgently fill. Elsewhere, a 10% uplift is more realistic.”

Respondents in Germany, Hong Kong and the Middle East are most expectant of a significant uplift, with 34%, 32% and 29% respectively saying they would expect at least 20-29% in order to move from their current employer. On Wall Street, 26% of respondents said they would require an increase of up to 29% in order to move, just ahead of the 25% who said they would need 10-19% more. In the UK (29%), Singapore (33%), Australia (25%) and France (33%), the largest proportion of respondents said they’d want a 10-19% pay rise to switch jobs.

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