In Europe, Banks Do More to Ease the Sting of Layoffs
If you are going to be "pink-slipped" from your banking job, it's far better to be employed by a European than an American bank.
The foreign institution usually offers a richer severance package than its American counterpart, according to bankers on both sides of the Atlantic.
In fact, American managers might learn a lesson or two from the British.
Compared with U.S. banks, which have a reputation for hard-nosed "hire and fire" employment policies, European institutions have traditionally offered more generous terms to surplus staff, said the personnel director at one major U.S. bank in London.
This executive, speaking on the condition that he not be identified, said: "Like most other U.S. banks, our operations in Europe work within not only the local framework for statutory protection for workers, but also the social and financial-market practices that dictate layoff benefits."
In a typically English touch, "gardening leave" is the term used by British bankers who are now sending some staff home on full pay to, in effect, watch the grass grow. In the meantime, the employer takes responsibility for trying to find another position for the employee.
But critics complain that the gardening terminology makes light of a bad situation.
"The bank says it will pay you to stay at home for a few weeks or months while they try to find you another job," said Richard Lynch, head of the London division of the Banking and Insurance Finances Union.
"Then you are called back and in most cases told you are being made redundant" - in American words, laid off.
Yet even when layoffs are inevitable, Europeans make out better than U.S. bankers. In such countries as Britain and France, socialist governments established laws and regulations that force employers to set handsome settlements. The result is packages that U.S. bank employees might envy.
A managerial-level banker in Britain with about 10 years of service can expect a severance package equal to nine months' salary. A comparable settlement in the United States would be about three to four months' salary, said a spokesman for Chase Manhattan Corp.
Further sweetening the deal in Britain is a tax loophole that allows the first $48,000 of this payoff tax-free. In the United States, all earnings are taxed.
But British institutions are eager to reduce the hefty sums they must put aside to bankroll layoffs. To this end, they've dreamed up an innovative scheme to keep the work force at the right size.
Roger Stear, director of Jonathan Wren, London employment specialists, said banks are taking a leaf out of the book of other industries, particularly high-tech areas like computers, by offering personnel short to medium-term contracts of up to five years.
These are usually for people working on a project that has a predetermined start-up and implementation period.
"An employee then gets guaranteed work and the possibility of reemployment after the contract is up," said Mr. Stear. "Fundamentally, it's a lot more honest this way than if someone joins the bank thinking it's a job for life and then gets canned after a few years with brief notice."
Among banks in Europe, human-resources officers confirm, contracts are among a number of techniques used to create more mobile work forces.
"Contracts are among a richer set of options needed, including more job sharing and part-time employment," said one banking manager. "I think Europe's a bit ahead of the U.S. in this, including hiring off-payroll contract staff to implement new projects, particularly in the electronic banking field."
"The trend is moving from downsizing, where a bank trims personnel by say 10%, toward right-sizing, a continuing process of taking outmoded products out and replacing them," said Thomas O'Reilly, an executive with the outplacement firm of Lee Hecht Harrison. "People can rapidly become surplus."