How to establish whether your investment banking redundancy payment is normal

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Rumours are reaching us of poor severance packages at investment banks. One British investment bank (not RBS) is allegedly paying the statutory minimum (one week's pay per year of service). Recently redundant bankers there are said to be looking enviously at all those who lost their jobs earlier on.


What amounts to a good investment banking severance package? Making an objective assessment is impossible. In the second quarter, Deutsche paid an average of €42m in severance payments and reduced headcount by 177 people, implying an average payout of €237k (£188k) per head. However, Deusche's headcount reduction is a net figure and may have been offset by hiring and upgrading - its €42m in severance payments could have been shared between far more people and would, in any case, not have been allocated equally.


In the absence of hard figures, employment lawyers suggest a rule of thumb approach. Anything from two weeks to one month's salary per year of service is normal. One week is abnormal.


You should leave with all your deferred bonuses from previous years, which will vest according to their established vesting schedule.


Philip Landau, at Landau Zeffertt Weir Solicitors, says most banks will not be explicit about how severance payments have been calculated: "They'll usually just give people a lump sum," he said. Landau notes that these lump sums seem to have been becoming smaller: in the past £100k+ packages were issued around 20% of the time to investment bankers; nowadays he says he sees them, "hardly ever."


Nevertheless, Charles Ferguson, of Ferguson Solicitors, says investment banks have good reason to keep redundancy payments elevated. Payments in unfair dismissal cases in the UK are capped at £72k. If banks always pay somewhere near this amount in their severance payments, ex-employees have no real incentive to risk losing this by taking their previous employer to a tribunal for failing to follow correct process when making redundancies.


"If banks generally offer severance packages of £60-70k, people are going to have to claim a really serious figure to make it worthwhile pursuing that bank through the courts," reflects Ferguson.


In most cases, he points out, the only way of getting more than £72k in a dismissal case is by claiming you were discriminated against. By this rationale, if you're a minority who's made redundant from a bank, your package should be quite a lot higher.












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