Investment banks say they will not be responding to Andersen Consulting's offer last week of a 10,000 (€16,500) signing-on bonus for graduate recruits.
Graduate salaries in investment banking are already very generous, they say, and have grown substantially in recent years. Two years ago, say banking sources, the starting salary was in the region of 26,000. This year top investment banks will be paying closer to 35,000, plus a bonus, for the brightest graduates.
Signing-on bonuses are now paid by one in five employers, according to Carl Gilleard of the Association of Graduate Recruiters. Investment banks, which have traditionally led the way with these golden hellos, say their starting bonuses will remain in the 2,000 to 7,000 range this year, despite Andersen's move.
Before its announcement last week, Andersen was offering a basic starting salary of 25,500. The new offer will take the total package, including overtime and the golden hello, to 42,200. That compares with a median starting salary for a 1999 graduate recruit of 17,500.
So, why the need to up the stakes? Anderson attributes its generosity to wanting to help graduates manage their debts, which are increasingly due to university tuition fees. But the pay hike is also linked to the tightness of the graduate recruitment market. Andersen Consulting intends to recruit 500-600 graduates next year.
Banks claim that Andersen Consulting's partnership status contributes to its need to offer cash incentives. 'Employees don't get any equity. Stock is increasingly being made available to employees at all levels in banking,' says one insider.
However, despite the generosity of starting salaries, competing for graduates through remuneration may be misguided. In this year's Universum survey of graduates applying to investment banks, only 17% ranked competitive compensation as one of the leading attractions of an employer. Training ranked as the top attraction, along with international career opportunities.
Interestingly, Andersen Consulting already has an excellent name as a graduate employer. The Times newspaper's 1999 High Fliers survey showed that 14.1% of graduates questioned applied to Andersen Consulting, compared with 8.6% to JP Morgan, the most popular investment banking destination.
Recent graduates confirm their interest in softer issues. 'Ten thousand would have made a difference only if there were two similar offers on the table and one had a golden hello and the other one didn't,' says James Hodgson, a recent graduate in IT from Oxford University. 'Training and a balanced life are more important than a golden hello.'
However, this year's graduates have not had to pay tuition fees. Without fees, the Barclays survey of student debt puts the average rate of debt on graduation at 5,286. When fees are added, the National Union of Students forecasts that students will leave with average debts of 12,000 and even more substantial debts seem likely in the longer term.
Banks may yet find that golden hellos, of the size already offered to help MBA students pay off course debts, may be necessary to appeal to top performers.