This survey provides a guide to compensation levels for the bonus year 2003. The majority of bonus payments have now been distributed and these figures demonstrate 2003 performance levels. Our figures are taken from a wide range of individuals as a sample population across investment banks, brokerage houses, asset managers, hedge funds and sector vendors. The figures have been taken from current salaries of employees as well as the value of offers being made at this time.
2003 was another difficult year for both the banking and recruitment sectors, with little demand for hiring in the first 2 quarters of the year. While redundancies and cost cutting declined the general market was one of stagnation. The 2nd half of the year saw improvements with a small number of organisations beginning to sign off new projects and dip into the market to recruit. These projects were mainly front office product facing, namely derivatives where better levels of revenue were being earned.
By April 2004 the market had changed from supply to demand led, with a shortage of candidates with specific technology or business expertise. A small number of top tier investment banks have ambitious plans for expansion in Europe; this has had a significant impact on the demand for IT staff. Demand has centred on technical development staff but this is beginning to broaden into infrastructure, support and management. It is widely accepted that both the recruitment market and general economy are growing; this is fuelling confidence in both candidates and clients. Candidates are no longer concerned about the possibility of redundancy and clients are looking for competitive advantage through advanced technology and systems.
The following page shows the compensation levels of a number of IT functions. The overall picture is one of increasing levels; senior management have remained the same with perhaps a better bonus pool than 02/03. The most significant increases are for Developers and Analysts, these candidates are in demand and the supply of good ones is relatively low (less graduates recruited in the last 3 years etc) This is basically a supply and demand issue; key investment banks are prepared to increase salaries to attract the best candidates. This has made the market much more competitive and we are seeing candidates with multiple offers as well as a rise in the number of “buy backs” from their current employer. Candidates now need to be managed more closely by recruiters and clients need to move quickly through the process and offer quickly to secure the best candidates.
2003 continued to be a difficult market for IT contractors in the City. Project/Programme managers fared the worst due to cutbacks in the managerial grades and a general lack of new project initiatives. Developers, particularly those with .NET and/or Java and with specific business knowledge fared better and were still able to secure opportunities though this often took longer than they had been used to . Some organisations used their contractor numbers as a strategic buffer against having to make redundancies amongst their permanent headcount and following a slow end to the year, numbers are starting to rise significantly now. Most demand appears to be within development (Java, .NET, VB with web technologies and C++) and business analysis with specific business knowledge (i.e. credit risk, derivatives, fixed income) though we anticipate more activity at the managerial level as the year goes on. Many organisations are re-starting projects which were previously on hold and others have very active recruitment drives for new development initiatives. After a series of cuts during 2001/2002 contract rates are definitely increasing though it seems unlikely in the short to medium term that they will be fully restored to pre 2001 levels.
Contractors are becoming an option where permanent staff are unavailable or where resource is needed quickly –it is a good way of securing candidates quickly in a very competitive market as the recruitment and offer process is much shorter than a permanent hire.
Recruitment activity is increasing and we now face the problem of a lack of good candidates in a much more competitive market. Increased salaries and an increase in contract roles are already apparent and will continue to increase over the next year as most of the key players in investment banking compete for a smaller pool of candidates. The reduction in graduate and junior staff hiring over the last 2 years means that there is a lack of 2-3 year experienced developers, business analysts etc. The increase in salaries of other industries and the continued migration out of London are also factors.
Turnover rates have remained very low in the past 2 years; this is changing while candidates are tempted by higher salaries and new projects. We expect turnover rates to settle down later in the year to a more reasonable level of 8-10%. HR departments are already focussing on salary reviews and retention packages to maintain the talent pool, but this may not be enough to stem the flow when the contract market gathers pace. Aggressive timescales on offers, bidding wars and buy backs will become more evident as the year develops.
The solution for many organisations is to use outsourcing partners or consultancies to body shop. This may work well for large scale projects but the majority of projects emerging are tactical business facing solutions where outsourcing needs to be very closely managed to succeed. Other alternatives are to hire non banking staff with the right attitude and fast track them through training and to retrain current staff into other products and technologies. These require time delays to get candidates up to speed and a different approach to hiring non banking staff.
What skills are going to be in demand? We see the demand for experienced developers continuing, particularly those with banking product knowledge. Key development skills will be C#, Java, .Net as well as continued demand for good C++ experience. Hot product areas will continue to be front office derivatives but as the equity markets improve they will also need to hire; as will Risk areas with increased regulatory pressures. The demand for senior specialists and managers will increase as project volumes increase and increased turnover creates more replacement hiring and upgrading. We have also noticed a move towards project managers with formal methodologies and governance experience. Other areas include support and infrastructure which will need to grow to support the increased development work.