However bad things are at Deutsche Bank ahead of next week's potential mass layoffs, another group of banking employees is also feeling the pain: contractors. In London, in particular, their jobs have been falling off a cliff and until recently no one has really noticed.
"I've been a contractor for 10 years and my rate was at least £600 a day," says one experienced project manager in the banking market. "Now, the only job I can get is with a consultancy company offering me no more than £75k a year. - A 40% pay cut."
The plight of contractors was highlighted last week when Morgan Stanley decided it would stop hiring individual contractors. HSBC and M&G investments have done the same.
The British government is to blame. David Chaplin, a long-term contractor in the financial services sector and author of a number of guides to contracting, says banks are amending their approach to contractors ahead of payroll reforms coming in April 2020.
From April 2020 onwards, the onus will be on employers to establish whether contractors are really contractors or simply employees in disguise. If contractors are deemed to be employees, employers must pay 13.8% of their salary in employer's National Insurance. From next April the liability for a wrong categorisation is being shifted to employers, and organisations that employ a lot of contractors (like banks) don't want it on their books. "If you hire a lot of contractors and you get it wrong, you will have a massive contingent liability building up over time," Chaplin says.
It is to avoid this risk that banks like HSBC and Morgan Stanley have announced they will only engage consultancy firms - or that existing contractors must become permanent employees. In both cases, individual contractors complain that they're being made to take big pay cuts.
"These consulting firms offer terrible pay and terrible working conditions," complains the project manager. "They make you become an employee and cut your pay, but there's no job security - people who were contractors have to work very long hours and they just get sacked when their projects finish."
It doesn't help that some of the work that kept contractors busy in recent years has disappeared. Yes, there's still Brexit, but MiFID II has come to an end and there's not much to replace it. Even in New York, where contractors don't face the same tax treatment, recruitment firm Affinity North says there's been a hard freeze on contractor hiring.
Chaplin says banks in London are "paranoid" about the coming payroll changes but that contractors in the City have been here before. "This is really just rolling the clock back to the late 1990s when most contractors worked for consultancies that were just bodyshops. The consultancies charged us out to clients and offered little support and no training."
In the 2000s, Chaplin says contractors decided to rent themselves to banks directly and to "cut out the middleman." Now, however, the middleman is back. And he wants his cut.
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