A-Z of employment

eFC logo

A is for appraisal

Appraisal is the formal word for what goes on all the time in the work place - assessing who's hot and who's not. There are four main types of appraisal - ongoing, annual, upward and downward.

Ongoing appraisal is usually done with little ceremony: a word of praise, a note or an e-mail for a job well done is a key managerial tool to help motivate employees.

Conversely, sloppy or negligent work will be censured by a simple ticking-off or a more formal warning. A formal verbal warning will usually be done with at least two members of management present.

A warning in writing or email is often an early part of a procedure that can culminate in dismissal without compensation.

The annual appraisal is now a standard part of most working lives. It is the process by which each person in the company is formally assessed, and typically represents a hiatus in the working calendar. Sometimes as much as a whole week will be set aside for the business of annual appraisal.

The yardstick used is the job description, which will set out employees' goals and responsibilities. The employee must attain what is known as the Minimum Performance Standard in all areas of the job description.

The downward appraisal is the most common form. The executive assesses the hapless employee, who should then have a better idea of whether that promotion or pay rise is really going to happen.

The upward appraisal, while still the exception rather than the rule, is fast gaining popularity. It offers the opportunity for the employee to explain to management just where they are falling down on the job - or, of course, how wonderful they are.

Both upward and downward appraisals can be a major test of the diplomatic and communication skills of both parties.

B is for Bonus

At the risk of stating the obvious, bonuses are for the driven. They are the modern world's equivalent of the old aphorism that you eat what you kill.

Sales executives - whether the product being sold is advertising or bonds - have the most easily measurable yardstick for bonus allocation.

If they have sold $500m-worth of product, the size of the bonus is easily computed.

And if it is not double the bonus given to the employee who has brought just $250 million through the door, management can expect a problem. Fixing the bonus for, say, the head of research at an investment bank, is a tougher call.

A code of omerta - silence on pain of, almost, death - surrounds the allocation of bonuses. Most investment banks and financial institutions tend to announce them just ahead of Christmas. It is an annual occasion for self-righteous indignation and accusations of fat-cattery in the press.

Bonuses are coming to dominate most compensation packages, and in areas such as banking, already do. At most investment banks the bonus will be several times greater than basic salary.

Even managing director-level UK employees of a US investment bank will typically earn a (relatively) modest six-figure income. The long hours and the remorseless hard work would not be considered worthwhile for a basic of, say, 150,000. But the cash bonus of a significant multiple of this sum, plus options and the increasing dividend income from vested shares make for more solid 'compensation'.

Bonuses are typically tax-inefficient, being added to the top slice of income, but in a world where motivation is partly about being seen to be doing well, size matters.

C is for contract

Broadly speaking, it is a good idea to spend a relatively modest sum on a lawyer when an employment contract is presented. It may not be possible to vary the standard terms and conditions of an employer's job, but a skilled employment lawyer should be able to identify the obvious pitfalls fairly quickly.

This is just as well, since an assistant solicitor at a leading City of London firm will charge at least 200 an hour. Partners tend to charge their time out at 300 per hour.

Written contracts may be orally varied in the workplace - but anyone agreeing to work, say, hours different from those specified in the contract would do well to ask for a memo or email stating the precise terms on which the contract is being varied.

D is for delegation

The standard wisdom is that delegation is an art. Cynics would say that managers fall into two categories: control freaks who are incapable of delegating at all, and the bone-idle who want to delegate everything - including the substance of their own jobs.

Being delegated to do an important job is a good sign for an ambitious employee. However, if a manager is reluctant to delegate, an employee should make reference to his or her job description.

An employee can argue convincingly that all activities which are included in the job description must be delegated. If a specific task is to be performed, and the employee is to be judged on its accomplishment or otherwise, the employee can insist on the delegation of sufficient authority to get it done.

E is for Executive Search Consultant

Otherwise known as headhunters. Job applicants can find commentary on how to approach headhunters and generally deal with them best, if they make the initial approach [click on 'How to... handle headhunters'].

Employers, however, also need to consider how and when best to use an executive search consultant. The first quality a good headhunter has is that of discretion. An employer who does not want the market to know that a senior job is on offer is well advised to use a headhunter.

Typically, the high-profile position may be too sensitive - and involve too much in the way of office politics - for an individual manager to make the initial approach.

By using a search consultant, the employer can argue that due diligence has been applied ('we surveyed the market - and happened to get the woman we wanted anyway'). Another factor is the time and expertise required to find the right person.

Employers should expect to pay between a year and 18 months' worth of salary for a successful placement. Most headhunters work on a success fee basis. Advertising costs, plus entertainment charges, are an inevitable expense.

F is for Field training

Field training days are the salesperson's nightmare. Many City of London salespeople refuse to engage in them, for the reasons set out below.

The idea of field training is that it is supposed to enhance the manager's understanding of what an employee does - and, more importantly, to boost the skills of the employee.

Field training typically occurs outside the office and is done by employees who provide services on behalf of the employer to a client. The benefit for the manager is that he or she can observe the employee doing a normal day's work in a context where assessment would not normally be possible.

The manager will typically be introduced to the client as a colleague of the employee. The employee supposedly gets the benefit - after the training day - of the manager's superior skills and knowledge.

In practice, the employee - for example an institutional broker - would normally be reluctant to introduce a manager to a valued contact.

G is for Gardening Leave

There is no doubt that gardening leave is becoming more and more common as the market in financial services and other sectors of the UK industry becomes more and more competitive.

Gardening leave is, simply, a device whereby an employee who is leaving or being dismissed is kept out of the marketplace for a given period of time.

Gardening leave usually means that the employee retains employed status - complete with medical benefits, etc - but is not required to perform any of the working duties required in the relevant job description.

It is a means of retaining control of the employee - who is technically unable to do anything except potter about the garden, write poetry, etc. At the end of the gardening leave period, the employee may be free to compete with the employer's company.

The idea is that the garden leave period will have taken the wind out of the employee's sails, thus rendering the employee less of a competitive threat in the marketplace.

The garden leave period is related to the notice period but is not the same thing [see below - N is for Notice].

H is for Holidays

There are two basic approaches to holidays. The US style is to offer employees a maximum of three weeks holiday per annum and be more than a little scandalised if people actually take them all.

The European (excluding UK) attitude is to have 30 days as a standard holiday offering - and everyone is expected to use them. The UK is caught between the two, with strong resistance to the European model in some sectors of the economy and proposals for extending the average allowance - currently around 25 days - coming from other sectors.

Employers bleat about the cost of holidays (although with just 9, the UK has fewer statutory holidays than mainland Europe, where 12 or 13 are the norm). But stress-related illness is often best treated by a little leisure.

From an employee's perspective, perhaps the best axiom to consider is this: the first rule of negotiation is to be present in the room when a decision is being made. There are no reliable statistics on this, but it often occurs that a redundancy or other 'palace coup' occurs on the first day back from a break.

I is for Interview Technique

In the interview, all things are relative. If you have been approached, perhaps the best way forward is the famous line adopted by former BBC political editor, John Cole. The Beeb called him while he was at The Guardian and asked him if he would like to apply for the political editorship. Cole replied that he would like to take the job, not apply for it.

But, alas, most interviews tend to be a more delicate process of negotiation. If you have applied for the job, the simplest advice is to play to your strengths - personal and professional.

And here is a list of technical things that you can do to make sure you don't make any elementary mistakes in preparation:

1. Check out the location beforehand. Will the interview be in an office - if so, the employer's or a headhunter's? Will it be in a restaurant? (if you don't like fish, steer the employer away from taking you to a Japanese establishment) You can ask a personal assistant or secretary ahead of the meeting.

2. Re-read your curriculum vitae. Even though it's bound to be strictly accurate, you may be one of those people with different versions, which tweak up the elements that you expect a given employer to like. Make sure you know which version you sent out.

3. Re-read the advertisement's job specification.

4. Garner as much information about the company and the person interviewing you as possible ahead of the interview. Then get the interviewer to talk about his or her preferences. A rule of thumb is that when the interviewer starts talking to you, you are doing well. A talkative interviewer is opening up and you can work out what it is the interviewer really wants from a candidate.

5. Be prepared to have copies of qualifications to hand or pretty much instantly available (increasingly asked for nowadays, as many people tend to exaggerate their credentials). Also, ensure referees are primed to respond promptly, if asked to do so.

6. Ask what the next stage will be - phone call, letter, interview?

J is for Job Description

Vital, vital, vital. This is the benchmark against which all your performance is measured. Don't be fobbed off with a description that does not accord with your actual job. If things turn nasty, a job description, complete with minimum performance standards, could be a gun against your head.

You should make sure the job description clearly and accurately sets out prime work duties and the levels of operational efficiency needed to discharge them. It should also set out secondary duties and describe what you need to do to discharge those.

There should be a clear chain of command set out in the job description - the person to whom you report directly, and the people who report to you should be there in black and white.

And make sure it has the key elements - pay, holidays and other important employment terms. An hour or so of a lawyer's time here could be money well spent. If an offer has been made, you may well have some room for manoeuvre in tweaking a term or two in your favour. If the description is unfair or odd, a trained legal mind will spot it.

K is for Key Player

If you're a key player in any City of London team, you can expect all the benefits - the big bonuses, the job offers, the responsibility of leading by example. This is a current piece of workplace slang there is no formal way you can mark yourself out as a key player.

No job description that we are aware of has this in the title - but some companies, particularly start-ups, will take out 'key man' insurance, to compensate the corporation if a key employee dies in service.

L is for Learning Curve

This is a particularly useful piece of jargon for people just starting a job. In plain English it means 'I've only just begun and haven't a clue what I'm doing'.

It works well across all levels of an organisation.

It's not merely a way of excusing yourself to your boss. Just listen to chief executives justifying a rash decision to expand into a market where a company is getting punished for its naivety. Learning curves abound - but they are, by definition, only for the short-term.

M is for Mission Statement

Even in the City of London, where there is strong resistance to fadism, the mission statement is gaining ground. Among the 'bulge-bracket' banks, there is a growing trend for the mission statement - 'to be the market leader in European internet initial public offerings by the year 2002...', etc, etc - to be pinned up on the wall.

The language of the mission statement is supposed to be clipped, clear, realistic and memorable. Most people would probably agree that, in the City of London at least, the only kind of statement that meets those criteria is a bank statement.

N is for Notice Period

As the job market, particularly in areas such as banking, becomes more volatile, the notice period has gained greater importance in the process of job negotiation.

The reason for this is quite straightforward. When jobs are 'for life', the notice period is a mere detail. What counts in this situation is the civil servant's delight: the terms of the pay-related pension, the flexible working hours, the number of days' holiday.

However, the frequent job changes that come with a fluid, mobile labour market make the notice period a key element of a modern employment contract.

For the employer, the notice period is a defensive weapon. If key employees leave, the notice period can be used to prevent them working for the competition for the duration of the notice period.

The more senior the employee, the longer the notice period will be. A standard provision in modern contracts for senior executives is for the employer to reserve the right to offer payment in lieu of notice.

In the case of a senior executive with a six months' notice period, the employer may put the executive on three months' gardening leave (still employed with no duties to carry out - banned from working at all - see G, above) and then perhaps pay three months' wages in lieu of notice.

This would have the effect of allowing the employee to go back into the labour market and compete - but it would also allow the employer to deny the employee any equity in the company by terminating the employee's rights as a worker.

As options are vital part of modern remuneration packages [see options, below], the clever negotiation and use of notice periods is increasingly important.

For the employee, of course, a long notice period offers a safety net, for the occasion when that hastily-convened board meeting contains an unpleasant surprise.

O is for Options

It is a universally accepted fact that options are 'a good thing'. Indeed, they are - but few, even sophisticated players in the financial services industry, seem to have a genuine understanding of just what they are, and how they work.

Just about any worthwhile modern remuneration package - be it in the City of London or the 'new' economy - contains options, which are an important incentive scheme.

The basic idea is simple: the employer offers the employee, after a specified period, the option to purchase shares in the company at a favourable price. The options become exercisable over time - and typically the employer will offer a series of options, vesting (ie, becoming exercisable) on specified dates.

After an option has vested, the employee can exercise the right to purchase the shares on offer. If the price at which the shares can be purchased (known as the strike price) is less than the prevailing market value of the shares, the difference represents capital gain for the employee.

Choosing when to exercise a vested option has important tax consequences for the employee [see 'vesting', below] and fixing the strike price has fiscal ramifications for the employer [see 'strike price', below].

P is for Pension

Increased mobility in the labour market has hit the traditional pension scheme hard. Private, 'portable' pensions are gaining in popularity in the modern market.

Some employers will contribute to the individual's own scheme. Others require employees to join a 'group' plan that covers all company employees who decide to participate.

The benefit of joining a group scheme is that the employer makes a cash contribution to the fund from which the pension will be funded. The terms of the scheme will depend on the pension trust deed.

Two years' continuous contribution while remaining in employment is now a standard condition. If the employee leaves before two years, his contributions will be refunded and the employer will recoup its own contribution to the fund.

If the employee leaves after two years, there will usually be the choice of keeping the pension 'frozen' in the group scheme until retirement, or having the value of the fund - as defined by the transfer terms in the deed (often quite penal) - transferred to a private plan.

The principle is straightforward enough: pension is deferred pay, and you should negotiate for as much as you can from the employer, in as flexible, or 'portable', a format as possible.

Q is for Qualitative Research

Investment professionals like to make the distinction between qualitative and quantitative research. In the context of a job application, if a headhunter tells you that qualitative research has been undertaken, you can be sure that your references have been checked, and a few discreet 'word-of-mouth' enquiries made about your candidacy.

R is for Relocation

The real cost of living in different countries is a matter of consistent dispute in the hiring of top-level executives across international borders. Although relocation specialists offer comparative indices - the cost of accommodation, cars and a basket of consumer items - international relocation is complicated by differing tax regimes.

Accountants such as Arthur Andersen publish comparative tax and purchasing power tables that afford a useful supplement to the rather artificial cost of living indices.

The point, for an employee, is that relocation is expensive - and, especially given that relocation expenses are not taxable, the expense needs to be met in full by the employer.

S is for Strike Price

The strike price of an option is the price which an employee is asked to pay for a share in the employing company - should the employee choose to exercise an option to purchase.

When the company is quoted, the difference between the market value and the strike price is evident. If the company is not quoted, the valuation placed on it by the investors and existing shareholders will be the guide to the worth of the underlying equities.

The incentive for employees is obviously more significant with a low strike price. Unfortunately, tax and other consequences can flow from being over-generous.

A corporation may be deemed to have made a payment to the employee - the difference between the strike price and the market or current valuation. The corporation may then be required to pay income tax on this supposed emolument.

A further complication is the position of other shareholders, who may not accept that employees - despite the fact that in the case of start-ups they may be taking significant career risk - should receive equity at a lower price than that paid by the investors.

T is for Tax Planner

A tax planner specialises in structuring affairs in such a way as to minimise tax liability. Most expert tax planners are lawyers or accountants.

U is for Unfair Dismissal

Unfair dismissal means lawyers at dawn. This is a vigorous and expanding area of the law. It can also have a high media profile, typically when allegations of sexual harassment are made.

An employer will not be adjudged to have unfairly dismissed an employee if the duties set out in the employee's job description have clearly not been discharged. The law here has given us phrases like minimum performance standards, which are crucial in this area.

A large body of case law has already developed here as to the conduct of the employee and the employer. There is one rule of thumb here: no rights under unfair dismissal will accrue during the trial, or probationary, period of employment.

For senior executives, this period is usually six months - during which the employer is entitled to terminate a contract without giving a reason, and leaving the employee with no claim for unfair dismissal.

V is for Vesting

Vesting is a technical term which means that an employee is entitled to exercise a right to purchase shares in the employing (or sometimes holding) company. Options are typically structured in a series, vesting on successive anniversaries of employment.

It is important to understand the distinction between vesting and exercise. Once an option has vested the right to actually purchase the shares exists, but may not actually be exercised.

This could be because the underlying share price - as determined by the stockmarket or by other means - is not attractive (ie, it is less than or close to the strike price).

Again, it may be because the terms of the option agreement do not allow the exercise of an option until a certain amount of time has elapsed since vesting.

Once exercise does occur, an employee may trigger a major income tax and National Insurance problem.

Government-approved options schemes have been particularly inflexible in this regard, although legislation is in the pipeline to avoid unintentionally penalising the employee exercising the option. In any event, taking tax advice before exercising an option is strongly recommended.

W is for Workplace

People can talk a good game about e-working and the redundancy of the traditional office, but the advent of new technology has only served to underscore the importance of the workplace. Working as part of a foreign exchange, equity sales, or swaps team is a social activity.

Hence the location of the workplace - the aspect, and above all the difficulty and length of the commute - is vitally important. Ask any banker working in the legendarily unpopular Canary Wharf and confirmation will be forthcoming.

Health and safety regulations, by the way, require that a place of work must not be either extremely hot or unreasonably cold.

X is for eXpenses. Hurrah.

The expense account meal is making a comeback, particularly in financial circles. Meal is the operative word. Lunch is very much eaten on the hoof, with abstemiousness and mineral water the norm.

A broker will take a funds manager out for dinner, now, if there is a major piece of relationship building to be done. There is, of course, the exception that proves the rule, as the occasional multi-thousand pound lunch at Le Gavroche tends to confirm.

Y is for Yes Man

Two truths here.

1. We all know that every office has them in abundance

2. The Yes Man is always someone other than the person you are talking to.

Z is for Zeitgeist

Or one of those signs of the times. Ten years ago and more in the financial workplace there was the zeitgeist of the yuppy and all their accoutrements. The boom-time decade which is becoming known as the noughties has its own zeitgeist: it started with anything with an e-prefix or a dot-com suffix.

Popular job sectors

Loading...

Search jobs

Search articles

Close
Loading...
Loading...