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Dresdner redundancy payments said to be quite generous

There is much to complain about in Gresham Street. Severance packages do not appear to be among them.

The big cause for complaint is already well known: bonuses. Many hundreds of Dresdner bankers are said to be preparing a lawsuit after having their bonuses slashed by up to 90%.

Current and former Dresdner bankers say further discontent is being fostered by the “stunning lack of clarity” over what Commerz actually intends to do with the business.

“When they first took it over, their intention was to lose equity research, sales and trading, and most of M&A. Then they got excited and wanted to keep some of M&A. As I understand it, they are now looking through their business plans again,” says one.

“There’s a lot of uncertainty and complete radio silence from senior management,” says another. “No one really feels safe – even those who’d previously been told that they were ok, and there are rumours of another round of redundancies.”

In the event that further redundancies do take place, the good news is that severance packages don’t appear too bad. According to former and ex-insiders, DK is paying a minimum of five months’ salary to everyone with more than 2 years’ experience.

People who are let go with more than two years’ experience are said to be getting one month’s salary for every year, up to a maximum of one year.

If true, this is a little unfair on people who’ve worked at the bank for six years and only get six months’ salary. But for DK bankers who joined two years’ ago, the package appears to be one of the most generous in the City.

Comments (22)

Comments
  1. So if Commerz is cutting M&A, equity trading etc…what type of investment banking is going to be done at the combined entity? Dresdner was already weak in fixed income and commerz was no bond house. all I can see is Deutsche and the americans are going to have a field day with gaining market share in the home country – Germany. What is the game plan for Commerz?

  2. It is to compensate you for exactly that – joining this place 2 years ago when, if you were at all decent, you could, and SHOULD, have gone elsewhere….

  3. Talking about redundancy package, that offered by BofA seems to be the worst in the industry. It gives much less than a month for every year of service. Instead of using the latest salary in the calculation (which is higher), it averages out all historical salaries and hence use a lower number. Whatsmore, for people who don’t work an exact whole number of years for instance 5 yr and 10 months, it rounds down to count only 5 yrs. What could have been worse?

  4. puzzling indeed. what on earth is the game plan for commerz? Is there going to be any derivatives presence at all? Are they going to focus solely on low margin commercial lending to the mittelstand? I suspect they will abandon the investment bank altogether in due course. Get out while you still can………

  5. I don’t think they have one. They were hoping to keep some Dresdner guys in the more profitable areas. But is this logical any more now that these same guys are involved in an imminent lawsuit for unpaid bonuses?

  6. I mean to add to this, but just realised that I didn’t, that the people who are challenging DK in court can’t get those redundancy payments because they won’t sign compromise agreements. Bit of a difficult situation, particularly as DK bonuses may not have been very large anyway and the redundancy payments are at least certain.

    Sarah, Editor, eFinancialCareers Reply
     
  7. I am afraid the information in this article is incorrect. I was made redundant from Dresdner last year after 3 years at the bank as a Vice President in investment banking. I barely got 3 months as my redundancy package while others who had been there for a shorter time got much less. I can safely say that Dresdner offers less generous packages than other US bank. My advice: don’t believe the hype. There are lot of fantasy redundacy packages going around. The only people who might get the big payoffs are the ones who have been at the firm for 10 years. Not the juniors or mid level employees!

  8. i have it on good authority that redundancy packages for dresdner employees will be 1month basic salary. 2 months basic salary at best.

  9. the two posts above are both incorrect! Oh well there goes their opportunity for a career in journalism…
    It is in fact 5month for anyone employed over 1yr. Going upto a maximum of 12months

  10. when are decisions regarding business lines and redundancies due to be finalised?

  11. Initially decisions were due to be relayed to staff last Friday. But they weren’t….No idea now..

  12. Rumors are that the areas to be cut immediately will start so next week. Apparently things are so slow because of two things – Firstly, Commerz are revising their strategy given their new pay-masters in Berlin – this can be hardly good news for IB. Secondly, apparently the axe is not falling yet in London due to complications with German labour law.

    You may not know this, but effectively under German labour law a bank cannot fire ppl according to strategic thinking or individual performance – firings are according to social criteria. So if a married 50-yr old underperformer with 2 under-age kids is in the same team as a 35-yr old single outperformer – well, good night, outperformer. Hence, banks are not going for the above (“betriebsbedingte Kündigung”), but have to offer so-called termination contracts to employees they don’t want – the individuals concerned do not need to accept these contracts and can hence pressure the bank. Since, you may have been told you have to go, and you still may be at the bank 12 months down the line. Happened during the 2006 and 2007 crops of layoffs at DK in Frankfurt. Bless those on German contracts in London, else – tough luck…

  13. On Severance Packages – rumours abound but it seems that Sarah is on to something.

    Another unverified statement is that the severance package formula is as follows: Min. is 3 months severance, plus one month for each year of service on top for those working longer than 3 years at DK.

  14. @CDSnotWMD –

    Even by this quirk of labour laws, the underperformer effectively knows he is waiting to get fired. No corporate can afford to keep an underperformer when revenues are drying up and Angela Merkel isn’t going to use taxpayers’ money to prop up failing banks. The question is whether the underperformer can use the time effectively to move onto something else.

  15. Who was smoking what when that “betriebsbedingte Kündigung” was devised.

    Good Lord! Can anyone else verify this? An underperfomer would rather be kept-on because of family ties?

    There will be BLOOD!

    Mr. Frank White Reply
     
  16. Helmut, in principle I agree with you.

    However, in a merger situation where a number of x heads have to roll in order to deliver € y bn of synergies, the acquirer will try to minimise its integration costs. Hence, given a choice, a German bank (or a French one, just look at that dump Credit Agricole) would always prefer to cut more in London than in Frankfurt – CoBa did this already back in 2004/05 when they closed they ill-fated foray into IB.

    Secondly, yes, the UPerformer knows his time is up, but he can’t be forced out – he’ll be sat on a “zombie” floor together with other have-been employees and given menial tasks until he gives up – normally, ppl in such situations would try to line something else up whilst being on corp. welfare and having an in-tact CV (no redundancy).

  17. To Mr. Frank White:

    Frank – remember the “Anglo-Saxons” always bitching about socialism in continental Europe? Well, there you have a first-hand example of it.

    Another one: Look at what you can get on the dole as ex-banker in France – a few little tricks every good garlic and frog-legs connoisseur knows about and you’re in for € 3.5-5k a month for up to 1.5-2 yrs. Not bad eh?

  18. @ Frank White –

    M O L O N L A V E!!!

  19. Commerz was already cutting down its UK operations February of last year. They themselves aknowledged at the time that the DK product was in some dimensions significantly better, yet have essentially let it runs to pieces which may or may not have been a change for the locals. Good people but a case study for incentive systems at all levels.

  20. @CDSnotWMD –

    So from what you are saying, I have to ask… what incentive does a german have to work hard?

  21. excuse me for asking…but what exactly goes on at Dresdner ? I mean…do they do anything in the markets these days? Are they active ?
    why so many people under one roof doing absolutely nothing? Sack ’em all and be done with it, I say.

  22. Ok … so how much do I have to pay DK to leave their bank?

    Richard Roberts Reply
     

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