While Goldman Sachs is interviewing heavily for equity research jobs in Paris, it’s moving debt capital markets bankers to Frankfurt. Reuters reported yesterday that GS has put more than a dozen members of its London derivatives and DCM teams on notice to move to the German city by the end of June. Some of those team members have reportedly already signed German contracts. For this, they should be very grateful.
Although there has been persistent talk about Germany loosening its employment laws to make it easier to fire risk-taking bankers earning €234k+, so far nothing has happened. For the moment, therefore, conversion from a UK to a German employment contract is tantamount to a substantial increase in job security.
“Protection against dismissal is much stronger under German [than UK] employment law,” says Hans-Peter Löw, a partner at Allen & Overy in Frankfurt. “If a bank doesn’t have a good reason to dismiss you, the consequence is not a limited payment, but reinstatement,” Löw adds.
Unless they can prove they were discriminated against, bankers who are wrongfully dismissed in the UK have compensation for their trauma restricted to £80k. By comparison, bankers who are wrongfully dismissed in Germany are entitled to get their jobs back – at full pay.
Germany’s generous labour laws were in evidence in 2013, when Deutsche Bank was made to reinstate Frankfurt rates traders who had ben dismissed under the bank’s investigation into LIBOR fixing. The men included: Ardalan Gharagozlou, head of FX trading at Deutsche in Frankfurt, who received a bonus of €2.7m in 2011, and earned a salary of around €265k; Jörg Vogt, a senior trader, who earned a similar salary and received a bonus of €780k in 2011; and Kai-Uwe, a VP in FX trading, who earned a salary of around €130k, and received a bonus of €180k. While London-based traders fingered in the LIBOR investigation became unemployable, Frankfurt-based rates traders were reinstated in their (very lucrative) roles.
Such is the stringency of German employment protection, that Löw says banks attempt to navigate it with generous inducements for employees to go quietly. In the UK, Deutsche Bank has been criticized for cutting its severance pay to the statutory minimum of one week’s pay (based on salary) for each year of service. In Frankfurt, Löw says the going rate at all banks is more like one or two months’ compensation (salary plus bonus) for each year of service.
Despite the advantages, German recruiters are say London-based bankers are unwilling to move to Frankfurt, and would prefer to stay put. In the circumstances, the German government’s push to relax its Labour laws looks shortsighted: banks are moving parts of their operations to Frankfurt anyway; Germany should be touting it strict employment protection as a means of attracting the bankers to accompany them.
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