When we suggested a few months ago that banks might reduce their salaries this year, someone said we were ignorant of the principles of employment law and that salaries – having been increased – can’t be reduced again.
Not if you include a clause in the contract stating the increase will be subject to review after 24 months.
According to headhunters, this is the situation at Goldman Sachs.
When the bank increased its salaries in London in 2009, headhunters claim it did so on the written understanding that the increases would be reviewed in 24 months time. That deadline is now allegedly approaching and there is apparently concern that its salaries will be reduced.
“The fear is that they will cut people and then they will look at base salaries,” says a partner at one London search boutique.
Goldman didn’t immediately return a call for comment.
Jon Terry, head of the reward and compensation practice at PricewaterhouseCoopers, says most banks didn’t add clauses to their contracts saying that salary increases were only temporary. “They needed to be able to demonstrate to the FSA that the increases were genuine and couldn’t be considered as alternatives to bonuses,” he says.
Terry says some banks did include such clauses. He declined to comment on which banks these were, however.