US Banks Push Back on High Severance Costs in Paris

Paris has become one of the premier places in the world for hiring financial services talent. Just don’t try firing anybody. 

Labor laws in the City of Light are proving difficult for major US investment banks to navigate, the Financial Times reported over the weekend.

Across the Pond and the Channel

For years, London was the financial services mecca of Europe, and that mostly remains the case. Post-Brexit, however, it’s been tougher for London-based traders to offer services throughout the European Union, creating opportunities for multiple rival hubs in places like Frankfurt, Dublin, Warsaw, Amsterdam, and Milan. 

But Paris is the top choice of US investment banks looking to move staffers from the Big Smoke. Wall Street’s biggest banks including Goldman Sachs, JPMorgan, Citibank, Morgan Stanley, and Bank of America moved at least 1,600 staffers to Paris by last spring and planned even more hires, according to the FT. But while French President Emmanuel Macron has encouraged this influx of highly paid (and high-spending) white-collar workers, US banks find the country’s labor protections too restrictive when it comes to decreasing headcount. Banking is a cyclical industry – meaning it closely follows the rise and fall of the markets — but in Paris, losing headcount is a royal pain: 

• By last fall, the biggest US firms had already cut a combined 20,000 employees worldwide. That’s easy enough to do in the States, but offloading traders in France, especially those with salaries in the seven-figure territory, can require dismissal payments more than five times that of London.
• French lawmakers have introduced a reform package, but restrictions on dismissal costs for highly paid bankers have been left out. Representatives from US banks told the FT that in some cases hiring capacity has increased in Paris, but they still need to be able to respond if markets and trading opportunities go south. 

“We’d only really consider going much further in our hiring if French labor rules became truly adapted to these kinds of cyclical activities,” an investment bank rep told the FT.

Attractiveness Bill: US banks won’t hate everything about the reform package. One part of the bill would introduce multi-voting rights for initial public offerings, so startup founders don’t have to lose control of their companies. Under those rules, the French incarnation of Mark Zuckerberg could soon be upon us.