Recent research suggests that investment banks are handing out pay rises willy-nilly in order to circumvent the EU bonus cap restrictions. Nearly 80% of European banks are planning to raise base salaries for executives, according to Mercer, while 65% of UK financial services firms intend to increase salaries by up to 20% in order to hold on to ‘star performers’ after Brussels clamps down on pay, suggests recruiters Robert Half.
Not to burst the bubble here, but executives, ‘star performers’ and those earning over €500k only include a small proportion of people working in investment banking. “The regulation isn’t going to impact a huge number of individuals, and banks are reluctant to increase overall compensation costs, so any talk of across-the-board salary increases needs to be taken with a pinch of salt,” said Rupal Patel, director in executive compensation at KPMG. At Barclays, for instance, 1,731 people are either designated as ‘code staff’ or earn over €500k. Mercer estimates that just 6,255 material risk-takers would be affected by the cap.
In other words, if you want to secure a pay rise, you still need to work for it. This means negotiation and proving that you’re worth it. Here, according to careers coaches, are the best ways of doing this.
If you’re pitching for business in your job, you’ll have done your research – this means due diligence (is the timing right?), looking at competitors (are you underpaid relative to your peers?), and creating a case for using your services. Pay-rise negotiations should be no different, believes Simon North, co-founder of careers coaching service Position Ignition.
“Nine-tenths of pay negotiations is planning, something most investment bankers should excel at. Do your research and create a compelling business case for yourself,” he said.
“Expect that your boss has better information about your market value than you do,” said Peter Harrison, a former executive director at Goldman Sachs who now runs Harrison Careers. Banks will benchmark themselves against their peers with information provided by compensation experts like McLagan, as well as receiving regular updates from headhunters about swings in pay. What’s more, the bank will know where they sit on that average – it’s usually a deliberate ploy to be a high or low payer – so suggesting there are higher paying jobs out there will do nothing for your case
In other words, do your research and don’t simply reference a job advert for a similar role that paid £10k more than your position.
The sad fact is that an investment bank will not give you a pay rise for simply doing your job. Ensure that you’ve had a good year, and can track your successes before even broaching the subject with your manager – you need to be on a strong footing to proceed.
“Make a solid list of your contributions and have it to hand during the salary negotiation,” said Phil Sheridan, managing director of Robert Half UK. “Consider where you’ve provided return on investment and why you deserve a rise. If you can clearly state why you deserve a pay rise, you will be more likely to get it.”
Ultimately, if you’re going to get a pay rise, it’s your manager who will make the case for you. Going into a meeting like an aggressive bull in a china shop, making demands and finger pointing about being underpaid will get you nowhere. “Calmly explain your reasons for wanting a pay rise – this could involve explaining your personal motivations, such as school fees, childcare, or whatever – and then go on to justify the business case for increasing your salary. Ultimately, you need your manager to be onside, so being upfront is a good way of doing this,” said North.
You may have a specific figure in mind, say a 10% uplift, but you also need to go with an idea of a rise that may be satisfactory, if not ideal. If half of that is acceptable, you’d be a fool to turn it down, suggests North. Meanwhile, if cost constraints genuinely mean that a pay rise isn’t going to happen – again, be open to suggestions.
“Consider other benefits such as flexible working, additional annual leave or a performance bonus that you’d consider in the short run if additional base pay is not available,” said Sheridan. “Discuss specific milestones or criteria that would warrant a pay rise in the future if one is not available today.”
Threatening to resign if you don’t get a pay rise – even if you have an alternative job to go to and are expecting a counter offer – is a very bad idea. For a start, in the current climate – unless you’re a genuine star – banks will not rise to this sort of blackmail. Secondly, the HR team will assume you’re going to leave soon anyway and it’ll put you in a weaker position.
“Having worked in HR for 25 years, I can tell you that when someone offers their resignation, it is always accepted,” said North. “Even if you convince people to stay, they usually leave after a year.”
“Annual pay reviews are generally not a negotiation, so it’s a bad time to start demanding more,” said Andrew Pullman, managing director of People Risk Solutions and a long-standing investment banking human resources professional. “The best time is two to three months before the annual pay review, so your manager has time to implement a potential pay rise.”
If you’re disgruntled enough to be demanding a pay rise, you should have an exit strategy if your current employer refuses to budge. This means mapping the job market, as well as working out how much you should be paid.
“Ask yourself three questions: Am I doing something I enjoy where I feel I can grow? Am I working for someone I respect and can learn from? Am I being paid enough? Ask the third question first, and then if the answer to the others is ‘no’, you really need to move on,” said Pullman.
If you’ve been with the same firm for some time and you know that new recruits have been parachuted in on a higher salary than you, don’t use this as a source of disgruntlement.
“My first thought would be ‘you cheeky bugger’, and then my second would be to come up with a list of quantitative reasons why these people are being paid more. You’re on much safer ground focusing on the market rather than your colleagues,” said North.