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“You’re leaving? Here’s a 20% pay rise.” Buybacks are BACK

Buybacks banking

If you’re good at your current banking job and you attempt to leave for a new one, you could be in for a surprise. It may transpire that your current employer simply cannot bear to see you leave. You could even be offered a large amount of money to stay around.

“We’re encountering a lot of counteroffers,” says James Findlay, relationship director at London recruitment firm Selby Jennings. “People are getting increases in their base salaries of as much as 20-30%. Banks are deciding that it costs less to retain existing staff than to bring in new ones. In terms of time and cost efficiency, it’s easier to buy people back.”

It’s not just efficiency. Counteroffers, or buy-backs, are usually symptomatic of an active hiring market. There have been plenty of job moves in areas like leveraged finance this year and recruitment firm Dartmouth Partners’ M&A hiring index is up 115% year-on-year. Rather than frenzied hiring, however, recruiters say buybacks’ resurgent popularity is down to scarcity: there simply aren’t that many desirable and experienced juniors and mid-ranking staff out there and banks want to hold onto the ones they’ve got.

“The number of traders and salespeople in the market has fallen as headcount has been gradually reduced,” says Kumaran Surenthirathas, MD of Rosehill Search. “There aren’t many traders who are making considerable money for their banks or salespeople with strong relationships, especially at Senior Associate and VP level. This is the where fiercest competition for talent is.”

Buybacks are most prevalent when associates resign, says another headhunter, who asked not to be named. “Desks are running lean and they want to keep the associates they’ve got,” he says. “They know that quality is more important than ever and because intakes have been lower it’s hard to find people and difficult to hire.” For this reason, he says associates who quit get, “defensive bids,” while senior bankers are generally waved goodbye to. “When an expensive senior banker goes, it’s seen as a cost cut and is more likely to be welcomed.”

The temptation, clearly, is to threaten to leave and shakeout a big pay rise. Surenthirathas suggests banks have been keeping money back especially for this purpose. “If you’re a bank with a top Associate or VP, they’re likely to be targeted and you’ll need to go the extra mile to keep them. But rather than paying appropriately upfront, there’s a tendency for banks to underpay their staff but then to buy them back if and when necessary,” he says. This might be why Morgan Stanley, which is one of the worst payers at associate level, is reportedly most prone to buying people back when they try to quit.

Of course, accepting a buyback is frowned upon. The established wisdom is that once you’ve threatened to leave, you should do so, and that people who’ve threatened to leave and who stay will have poisoned the waters so much that they’ll leave soon anyway.

“If they sense weakness, banks will try and get you back,” says another recruiter, speaking on condition of anonymity. “You just need to be really firm about what your intentions are. 80% of people would never entertain a buy-back. We coach our candidates to be very definite about what they want to do.”

Recruiters are not entirely impartial here though. They have good reason to hate buybacks because when candidates don’t move they don’t get paid their fee. The next time a current employer offers you a 20% pay rise to stick around, you might want to discuss your dilemma with friends and family rather than your friendly recruitment consultant, therefore.


Contact: sbutcher@efinancialcareers.com

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