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Editor’s note: You may download the complete 2021 banking and financial services industry severance and workforce transition report here

Well before the major disruption that characterized 2020, banking and financial services companies were busy navigating change. Most notably, as increasingly digitally savvy consumers began to demand new digital touch points and more flexible tools, banking and financial services companies were forced to deliver – and they were scrambling. 

Of course, the onset of COVID-19 didn't make any of that easier. And since then, compounding the challenge, the financial sector has ranked among the hardest-hit industries. Case in point: bank valuations have decreased in every country around the world. 

Given that volatile context, it's worth asking: How have severance and workforce transitions in the banking and finance industry been impacted? We conducted a global survey of HR leaders – HR managers, CHROs and more – from major banking and financial services companies to find out. 

What we discovered might surprise you.

four high-level trends

Let's first unpack the most significant high-level trends, then turn to a discussion of opportunities and challenges in a little bit more detail. 

#1: While access to severance remains the same, benefits are getting cut.

Only 62% of banking and finance respondents said their organizations offer severance to all employees, the exact same percentage from 2019. What has changed? More than half (56%) made reductions to their eligibility benefits during that two-year period. 

#2: The workforce transition process is governed by employee tenure.

Tenure remains the number-one factor in determining the length of outplacement received by separated employees, for example. What's more, a tenure of five or more years is required for severance eligibility at roughly one in three banking and finance companies today. 

#3: Redeployment programs are largely successful, despite being under-resourced. 

Nearly three out of four respondents rated their redeployment programs as effective or very effective. At the same time, more than one in three indicated that partnering with an outside consultant could substantially improve the effectiveness of these programs – and that figure is nearly triple the number who felt the same in 2019. 

#4: When workforce transitions happen, employer branding takes a hit. 

In the aftermath of layoffs, the majority of banking and finance companies have experienced spikes in negative feedback on employer review sites and social media, tying banking and finance companies with their counterparts in tech for the highest percentage across industries. 

related content: 2021 guide to severance and workforce transition.

a closer look at severance eligibility

We mentioned that tenure — or employee loyalty — is a deciding factor in who is, and who isn't, eligible for severance at most banking and finance companies today. But perhaps the most noteworthy fact is how far out of sync the industry is with other sectors.

For example, only one percent of banking and finance extend severance eligibility to employees who have less than a year of tenure. By comparison, the same is true of 10x as many companies across all other industries. 

Particularly given the premium now placed on tech skills among banking and finance employers, which pits them against companies in tech (as well as just about every other sector) in today's hot talent market, this might not be advantageous – in fact, banking and finance employers would be wise to reconsider. The near-term cost savings could conceal no less costly long-term drawbacks when it comes to hiring. 

paving paths forward with retention and redeployment

Even prior to the pandemic, the banking and finance sector was feeling more than its fair share of misery when it came to hiring and retention. Large-scale employee burnout, diversity and inclusion issues and a generational divide in which millennial and Gen Z talent are much less likely to pursue work in the industry were constant headaches for HR teams across the space. Then the pandemic began.

With competition for top talent showing no sign of abating, what more can banking and financial services companies do to retain valuable employees during a downsizing?

Offering a retention incentive is one path forward most businesses have taken. In fact, only eight percent of employers in this space offer no retention incentives at all – nearly half the 14% average of all industries we surveyed. And unsurprisingly two of the incentives used by nearly half of companies are cash-focused: retention bonuses and payment of upcoming bonuses an employee would have been eligible for after termination.

Businesses in this space are also leveraging the power of redeployment to keep talent on board and address business demands. Nearly three out of four (73%) banking and finance companies have a redeployment program in place, and those efforts are largely proving successful, with 74% of respondents rating their organization's program as effective or highly effective.

And how are these organizations finding value through redeployment?

  • rapidly redeploying employees to other areas within the organization to address quickly shifting business demands
  • sharing talent temporarily with outside or partner companies to address shifting business demands and avoid layoffs
  • redeploying employees who have expressed a wish to make an internal move

Even with greater business agility realized through redeployment, there's always room for improvement. Respondents in this sector showed particular interest in finding ways to better match employees with open positions, offering more robust career coaching, and partnering with an outside consultant to make their program even more effective.

related content: Talent scarcity weighing you down? A redeployment strategy is your pick-me-up.

key takeaways for banking and financial services

Expanding access to severance for employees (alongside key benefits). Gauging employee sentiment to rein in negative sentiment on employer review sites and social media. Partnering with external consultants to strengthen redeployment offerings. All told, opportunities abound for banking and financial services employers to evolve and expand their severance programs – both to meet their employees' needs and to ensure their business maintains a positive employer brand, especially given the recent history of hiring woes across the industry.

If you're looking for even more insights into the state of severance and workforce transition at banking and finance companies right now, download our industry report today

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