Is it really so bad to be laid off?
With all the entitlements of modern contracts, some in the financial industry look forward to getting their hands on severance packages
Getting laid off sounds tough, but for a highly paid banker it is not always such a bad fate.
In the latest round of financial industry lay-offs that began over summer, hundreds of Asian-based jobs have been lost. The toll has been heavier in the United States and Europe.
I remember an entrepreneur friend once told me: “If you sack an employee, to some extent, that means you sack his whole family.”
But I know some people in the financial industry who can’t wait to get the chop so they can collect big severance packages in cash and other benefits.
In Hong Kong, people who lose their jobs at major international banks usually get severance equivalent to at least three months’ pay. Typically, the more senior the position, the more severance the person gets, and the longer the employment, the bigger the package.
Currently, the base salary for a managing director at an international bank in Hong Kong is between US$400,000 and US$500,000 annually, or about US$30,000 to US$40,000 a month. Often the severance calculation is based on the number of years of employment plus one or two months’ pay extra. So, if a person is employed for 10 years, he or she would receive 10 months of salary plus one or two months more.
Besides cash, there are often non-cash benefits, too, depending on the terms of the job contract. That may call for the employer to, say, provide free medical coverage and tax consultancy services for a year, or sometimes longer.
For some upper-echelon people with a guarantee of several years’ income written into their job contracts, being laid off can be like a long paid holiday.
The guarantee thing became popular among senior bankers after the 2008 global financial crisis, when a lot of bankers suddenly lost their jobs.
Headhunters often quote Nomura, Japan’s leading investment bank, as an example. It is widely believed that Nomura aggressively lured senior executives away from rival banks in 2009 and 2010 to help expand business outside Japan by guaranteeing them two or three years of salary – even if they got laid off in the meantime.
And finally, there is “gardening leave”.
This typically is offered to mid-level or senior professionals, particularly those involved in client relationships or with access to sensitive or competitive information in the company.
During gardening leave – usually three to six months – the employee is not supposed to do any work for a rival company. In return, the employee gets that salary paid in advance when leaving the company.
One of my friends has the gardening leave condition in his contract. He confided to me recently that it would not be a bad thing if he got laid off. That way, he could get six months’ salary immediately, and tend to his garden or prepare for his wedding or do whatever he wanted – as long as it did not involve work.
My friend is confident that he will not have any problem finding a job in the financial industry in six months. So, it would seem that being laid off is definitely not a bad thing, right?
George Chen is the Post’s financial services editor. Mr. Shangkong appears every Monday in the print version of the SCMP. For more, visit scmp.com/mrshangkong.