Recruitment is expected to cautiously rise whilst focusing on tight selection criteria.
Equity capital markets, leveraged and acquisition finance and debt capital markets all ramped up recruitment in 2015, although the front runner was M&A by some distance. We anticipate that these areas will all expand proportionately throughout 2016, with the traditional burst of activity in the first half of the year.
At the beginning of 2015, the EU imposed a cap on bonuses paid out by investment banks. The immediate response from the major US investment banks was to raise base salaries of their investment banking employees by upwards of 20%. By July 2015, almost every bank in London had raised their base salaries in line with the US banks to compete for the best talent.
Outside of banks, the private equity firms and corporate finance boutiques, unaffected by the cap, are still expected to pay significant bonuses to their staff. Their challenge is being able to retain staff since the banks raised salaries so considerably.
Our prediction for 2016 is that bonus awards within investment banking will be paid over a much wider range than in previous years. The general opinion is that top performers could expect bonuses up to 100% of base, employees performing below expectations will receive considerably less, possibly as low as 20%. In previous years, bonuses were more evenly distributed, without the disparity we are seeing now.
Overall, attracting and retaining top talent will be very competitive in 2016. The best candidates will have many opportunities to explore, placing even more pressure on employers to adopt robust retention strategies and attractive hiring programs.