When the financial collapse hit, big banks tweaked their philosophy when it came to the little hiring that they did, at least in the back office. Rather than making permanent offers to non-revenue generators, banks were more prone to bring new employees on as contractors. This practice, thankfully for those back office staffers that have been dealing with it, is slowing.
Recruiters tell us that back office and support areas like accounting, IT, finance and operations are hiring a stronger mix of full-time, salaried employees as opposed to contractors, or temps. They are also converting more of their current contractors to permanent employees.
Banks were particularly prone to use contractors in the aftermath of the collapse. As publicly traded companies with shareholders fretting over pay, it made sense to bring on new back office employees as contractors, meaning they didn’t add to the compensation pool or headcount numbers, said John Ricco, partner at financial services search firm Atlantic Group.
“Contractors don’t show up on books. They show up as an expense,” he said.
Then, of course, there are the benefits of not marrying yourself to an employee during a tumultuous economic period. Contractors often don’t receive benefits and you can cut bait with them at any time. Even private equity firms and hedge funds were taking advantage of the opportunity to employ the contractor model, Ricco said.
Many employees don’t like the practice, but some didn’t have a choice over the past few years. As Wall Street has stabilized a bit, firms have felt more comfortable bringing up headcount numbers in the back office. Frankly, their hand has been forced.
“Hiring in financial services [has] picked up overall,” said Anne Crowley, managing director at Jay Gaines & Co. “Hiring managers are now facing competition for good candidates, which we haven’t seen for several years.”
Plus, with recent reporting and IT mishaps involving the likes of Citi and J.P. Morgan, banks are less comfortable with non-full-time workers behind the wheel of what are now more critical areas, said one recruiter who asked to remain anonymous.
Peter Laughter, CEO of search firm Wall Street Services, confirmed that many of their consultants in operational roles are being converted to clients’ payroll, but said he is “skeptical that there is some sort of dramatic change.”
The one area where contractors and consultants are still being relied upon heavily is compliance, often to the advantage of the employee – at least for now. Due to the lack of supply, banks like J.P. Morgan are paying compliance consultants north of $100 per hour.
Plus, there is a sentiment shared amongst some in the industry that compliance spending is a bit reactionary, and will eventually stabilize. HSBC Chairman Douglas Flint said last month that banks were underprepared and were under-spending, and now they’re playing “catch-up.” The industry will find a middle ground eventually, Flint suggested. So get your money while you can.