Employment derivatives: Difference between revisions

 

Legend has it, upon being timorously asked for a raise, the [[Vampire Squid]]’s fearsome [[GC]] would theatrically throw open a draw with all the unsolicited CVs she had collected in the last week. “I am sure we’ll find someone to do your job if you’re too good for it.”

But this only works when the industry is not in the grip of some mania, as it tends to be from time to time: dot-com startups, hedge funds, crypto and private equity have all skewed the market for unremarkable drones in recent times. This is why you have to pay a brainless trainee two hundred grand.  

So that option is ugly both ways. Even for a vampire squid. Banks were themselves structurally short a rising bid. If rapacious [[private equity]] firms, or gormless [[crypto]] startups were poaching mid-ranking operations bulls, the banks had little choice but to follow the bid — for replacement hires. The banks thereby had duration risk: current staff would  put up with a certain amount of stuff arming, but there were limits. Traders in the [[human capital management]] desks traders priced staff were like callable fixed rate term debt with a three month call. New staff would come in at the prevailing astral rates, so hedging strategies became vital.

 

The first employment rate swap was between the mid market broker [[Wickliffe Hampton]] and then start-up darling [[lexrifyly]]. WH swapped its discretionary pool for Lexrifyly’s — complicated cross currency issues as it was denominated in crypto.

Meantime while periodic RIFs were greatly reduced they were not avoided entirely, and now could be handled quantitatively without reference to performance or value as it was baked into the credibility rating. This led to the curious counterintuitive phenomenon that the staff with the ''highest'' credibility ratings — ergo the most, well, “poubs for pound” expensive — were the first to go. This assisted also in the force ranking process.

 

They would be like [[interest rate swap|interest rate swaps]]. A bunch of large employers would submit, daily, how much they would be prepared to pay to hire established categories of worker, to derive some kind of London Inter-Employer Bid-Offer Rate (can we call this LIEBOR?). Then the British Human Capital Managers Association would compile and publish a list of rates. Employer could swap out their fixed costs for a floating rate, thereby hedging employment costs. Employees could do the same, hedging against their intrinsic loyalty discount, and restricting employee moves to genuine changes in role, or idiosyncratic hatred of boss, rather than just the need to rebenchmark periodically.