Goldman Sachs may be more principled than many other banks when it comes to paying bonuses to its employees who are being laid off. So says Charles Ferguson, a London-based employment lawyer who often works with disaffected traders.
“Goldman Sachs is an honorable bank in its dealings with its employees,” said Ferguson. “They take the view that dealing with their people reasonably is in the bank’s long term interest. For that reason, out of the hundreds of banks we’ve pursued over the years Goldman Sachs has only come across our screens on about three occasions – and at no time have we come across individuals from Goldman Sachs have felt they have been badly treated.”
The latest manifestation of Goldman’s honorableness is the bank’s decision to cull its lowest performing employees only after its bonuses have been paid. Reuters reported that Goldman is clearing out the weakest 5% of its employees, with deeper cuts in areas like equities trading.
Goldman did not return a request to comment on its alleged redundancies or on its bonus payment date. However, headhunters told us that Goldman’s bonuses have already been paid out. Our bonus calendar put Goldman’s payment date at the end of January.
In clearing out poor performers only after bonuses have been paid, Goldman appears to be at odds with other banks like Barclays, which recently cleared the ranks of senior bankers days before its bonuses were announced. Similarly, UBS is said to be announcing layoffs in its investment bank before bonuses are paid in March.
By laying off staff before bonuses, banks can save themselves a lot of money. “Most banks will choose to get rid of staff before bonuses because they have a clause in their contracts which says staff are entitled to bonuses only if they are in employment and not under notice (given or received) at the time bonuses are paid,” said Ronnie Fox at employment law specialists Fox Lawyers in London. The same principle applies in the US. “If there is a fully discretionary provision, there is really no recourse for the employee,” Joanne Seltzer, a partner in the New York City office of Jackson Lewis LLP, told us.
Whether banks choose to clear out employees just before bonus time is a reflection of their honorableness, said Ferguson. “If your employer is not honorable, it will bin you shortly before the date your bonus is announced and it’s just tough. If you’re working for an entity that has pretensions to honor its moral obligations, your bonus will be paid first.”
Ferguson declined to comment on which banks fire before bonuses, but said there is a distinct group of repeat offenders. Meanwhile, one headhunter pointed out that waiting until after bonuses are paid to make layoffs isn’t so moral if the bonuses were zero. “There were quite a few zeroes among Goldman’s bonuses this year,” he added.