City staff get bonus for recruitment help

Three years of job cuts and miserly bonuses in the City may soon be over - the investment bank Lehman Brothers is offering staff £6,000 payments for referring recruits to the company.

The development may not signal a return to the high-rolling years of the mid 1990s, when six-figure bonuses were commonplace. But many in the recruitment industry say it is a sign that financial institutions believe the stock market is showing sustainable growth.

Lehman, an American bank that employs 3,000 people in Britain, has told staff they could be entitled to up to £6,000 if they suggest names for positions as vice-presidents - a middle-ranking title in investment banks. Recommending more junior candidates entitles employees to a smaller bonus payment.

Lehman said the practice had been in place for some time, though it has made it more high profile since the start of this year. "It has been very successful and involves in the recruitment process our employees, who are often our most enthusiastic ambassadors," a spokesperson for Lehman said.

The scheme can be cost effective. A head hunter who places a senior candidate at a bank takes the equivalent of about one third of their basic first-year salary as a fee. For a vice-president of a big bank, that could mean a payment of about £20,000.

Lehman is just one of a number of banks that offer incentives to staff for referring candidates. At JP Morgan,staff in London are entitled to up to £3,500 for successfully suggesting someone.

Those in the recruitment industry report that the practice is increasing and comes after savage cost-cutting since stock markets started to fall in 2000. Jonathan Evans, head of the City recruitment firm Sammons, said: "The major investment banks have cut way too close to the bone and are now under-staffed. Indeed, approaches have been made to staff who were sacked 12 months ago."

About 100,000 people have lost their jobs in the City and on Wall Street in the past few years. Lehman has been one of the most restrained banks in the waves of lay-offs because it was not as aggressive in its recruitment drive when equity markets were booming at an unsustainable rate in the 1990s.