With a turbulent UK economy, the financial sector, particularly investment banking and private equity, is seeing unprecedented job cuts.
Hardly surprising with reports of third-quarter earnings falling well below expectation, and several banks, such as Goldman Sachs, culling staff for the first time since 2019. Approximately 10% of Berenberg’s investment banking employees have lost their jobs; and the slump in deals is set to trigger a new wave of redundancies for HSBC staff.
The global economic crisis and poor performance is causing many financial institutions to remove “expensive” or “surplus” headcount at many levels.
If you find yourself facing redundancy, here are our 10 top tips for navigating the process:
1. Is it fair?
Are the reasons being given for your proposed redundancy justifiable or are politics at play? Is a proper consultation process being conducted or has the decision already been made? If you have concerns on either front, this could be grounds for unfair dismissal.
2. Check your notice period
Check your employment contract to establish how much notice your employer is obliged to give you. Rather than work out your notice, there may be scope to discuss with your employer whether you can be placed on garden leave or be given a payment in lieu of your notice period; options that are often at your employer’s discretion.
3. Are there mass redundancies?
Depending on the number of people being made redundant, your employer has legal obligations.
If 20 or more employees are being made redundant within 90 days, your employer must consult collectively with employee-elected representatives and must also notify the Department for Business, Energy and Industrial Strategy. Importantly, the consultation must last at least 30 days before any dismissal can take place. Where there are 100 or more proposed redundancies, the consultation must begin at least 45 days in advance of any dismissals.
If your employer breaches these strict obligations, each affected employee may be eligible for 90 days’ pay.
4. Restrictive covenants
Contracts of employment are very likely to contain some, if not all, of the following restrictions that will apply to you once you have left your employer:
- Non-solicitation and non-dealing of clients and customers (and sometimes suppliers);
- Non-poaching of other employees who have worked with you; and
- Non-competing by joining a direct competitor.
These types of restrictions are included to protect your employer from losing business, goodwill and its remaining employees once your employment has ended. Such restrictions will usually apply regardless of whether you are placed on garden leave, work your notice period or you receive a payment in lieu of your notice period.
The terms of the restrictions can be very limiting and therefore it is essential to check how they may fetter your ability to take your skills and move elsewhere for a set period. Equally importantly, they can be poorly drafted and too wide to be enforceable. If the restriction is ambiguous or it appears far too wide in scope, area or period, it may well be unenforceable. Consequently, time spent carefully considering the wording of each restriction may well prove to be time well spent, as there may be an opportunity to remove or agree variations with your employer as part of any departure discussion.
Finally, if the restrictions are enforceable, you should avoid breaching them since your former employer could seek an injunction against both you and your new employer which prohibits you from acting in breach, as well as seeking an amount of damages from you arising from your breach along with the legal costs incurred.
Seeking legal advice at an early stage in the redundancy process on some of these trickier and more complex issues can be time that is well spent, since employers will often be prepared to engage with you and seek to agree a respectful and fairer outcome on a mutually agreed basis.
5. Bonuses
Many employees will be deprived of their hard-earned bonuses if they are under notice or have left by the time it is payable, although some schemes may treat employees who are being made redundant as “good leavers” which may provide some form of bonus entitlement.
This is always a thorny issue, especially when your performance has been strong and the decision to remove you comes towards or after the end of the bonus year, so it’s all the more important to check your contract and scheme rules thoroughly.
6. Deferred incentives
Similarly, when it comes to deferred stock or cash, the terms of the relevant plans need to be checked carefully to see whether the impact of a decision to make you redundant will result in your deferred incentives being forfeited, pro-rated or unchanged.
From experience, there are a wide variety of outcomes and any “good leaver” terms should be reviewed along with any terms which could change you from being a “good leaver” to a “bad leaver”, for example, if you join a direct competitor.
In the banking sector this is particularly relevant, especially if you are wanting to pursue your career elsewhere and where part of any joining negotiations could factor in the possibility of “like for like” replacements if you are likely to forgo your deferred incentives by moving to the competitor.
7. Benefits and Insurance cover
With the stresses and strains presently facing the NHS, knowing what can and cannot be achieved with your private health cover once you have left is vital.
Many providers will allow you to continue the same cover with higher, personally funded premiums, once you are no longer an employee. It’s worth exploring whether your employer can continue funding your cover until the expiry of the present term of the cover or for an agreed period of months after you have left.
Check to see if your employer has provided you with income protection insurance since this can be a valuable and sometimes vital source of income if securing new employment if likely to take several months. Whilst it is only a short-term solution, it may help go towards replacing your lost wages with monthly, tax-free payments for a specified period of months. The total sum is normally 50-70% of your annual income before tax.
With the stress and anxiety that inevitably accompanies facing redundancy, if useful, do explore speaking with any confidential mental health providers offered by your employer.
8. Outplacement support
This is a common benefit offered to employees facing redundancy. It is usually worth taking up and engaging with the employer’s chosen provider of outplacement services sooner rather than later. Even if a new job does not emerge directly from the support you are given, it is a valuable opportunity to explore different job search engines and opportunities as well as prepare yourself for the recruitment process.
Additionally, if you’ve worked for your employer for two years or more at the end of your notice period, you’re entitled to paid time off to apply for jobs or go on training, which can be taken at any time during normal working hours.
9. References
It is generally good practice for employers to give references for former employees, and for FCA-regulated companies this is a legal requirement.
Any reference given must be accurate, so often employers will only provide factual references covering your name, role and term of employment. Where possible a more detailed reference covering your role, responsibilities and soft skills can be helpful and worth asking for.
It is always sensible to check what type of reference will be provided and by whom as well as, if possible, agreeing its content.
If the reference is inaccurate or misleading, you may be able to pursue a damages claim if the reference has resulted in losses.
10. Company property
On terminating of employment, or sometimes at the outset of the consultation process, your employer will require you to return all company property. Terms setting out how this is done, and when it must be done by, will normally be detailed in your contract of employment. This often covers your laptop, mobile phone and other work devices along with your employer’s documents and data.
Comment by Jo Keddie, Senior Partner at Winckworth Sherwood
