Securities Firms Begin Layoffs and Salary Cuts: How Should Gold Collars Adjust Their Career Paths? (AI Translation)
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文｜财新周刊 王娟娟 夏怡宁
By Caixin Weekly's Wang Juanjuan, Xia Yining
春光明媚，但证券行业的打工人仍觉寒意。
Spring is bright and sunny, yet workers in the securities industry still feel the chill.
“去年上半年研究所亏损，下半年就开始全面降薪、变相裁员。研究所本来有200多号人，现在只剩一百五六十人了。”一位近几个月被迫跳槽的券商分析师对财新表示。该分析师原所在的券商年佣金收入超过5亿元，排名可进入行业前十。
"In the first half of last year, the research institute was losing money, and in the second half of the year, they started to cut salaries across the board and lay off staff in a roundabout way. The institute originally had more than 200 people, but now only about 150 to 160 remain," a securities analyst who was forced to change jobs in recent months told Caixin. The brokerage firm where the analyst previously worked had an annual commission income of over 500 million yuan, ranking it among the top ten in the industry.
相比之下，部分中小券商的裁员降薪更为大刀阔斧。据财新了解，多家小券商在近两个月开始降薪，降年终奖、降月度绩效、降基础薪酬，乃至下调公积金缴纳比例，主要在高薪员工集中的投行及研究所，投行目前因IPO业务停滞而存在冗员，研究所则正经历公募降费的阵痛，面临洗牌。
In contrast, some smaller brokerage firms have implemented more drastic layoffs and pay cuts. According to Caixin, several small brokerages began reducing salaries in the past two months, including cuts to year-end bonuses, monthly performance rewards, base salaries, and even lowering the proportion of contributions to housing provident funds. These measures are primarily targeted at high-earning employees in investment banking and research departments. Investment banking is currently experiencing redundancies due to a halt in IPO activities, while research departments are facing a reshuffle amid the pain of reduced fees for public funds.
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- The securities industry in China is experiencing widespread salary reductions and layoffs, with a significant number of firms, including large and medium-sized brokerages, implementing pay cuts across various departments due to economic downturns and regulatory pressures for "common prosperity."
- The average salary in the securities industry has seen a decline, with the top brokerage firms also reporting decreases in executive compensation. Discussions are ongoing about imposing a salary cap of 3 million yuan for key personnel and executives in state-owned financial institutions, reflecting broader efforts to reform income distribution within the sector.
- Investment banking departments face particular challenges with reduced IPO activity leading to job cuts and reassignments. Meanwhile, research departments are grappling with cost pressures from public fund fee reductions and shifts towards more diversified services beyond traditional brokerage functions.
The securities industry in China is experiencing significant changes, with many firms facing financial challenges that have led to salary cuts and layoffs. A securities analyst shared with Caixin that their former brokerage firm, which ranked among the top ten in the industry by commission income, had to reduce its workforce from over 200 to about 150-160 employees due to financial losses [para. 1]. Smaller brokerage firms have implemented even more drastic measures, including reducing salaries, bonuses, and contributions to housing provident funds, primarily affecting high-earning employees in investment banking and research departments [para. 2].
The financial sector is known for high salaries, often exceeding those in other industries. However, the current economic downturn and a policy emphasis on "common prosperity" have made high compensation in the securities industry controversial [para. 3]. Recent financial reports from listed brokerage firms show a continuous impact of salary reductions and layoffs. Among 22 listed brokerage firms that disclosed their annual reports so far, there has been an average salary decrease of about 3% compared to last year [para. 4].
Notably, executives are also facing significant pay cuts. The total immediate compensation for management at 22 brokerage firms saw a year-over-year reduction of 10.59%. Including deferred compensation payable in 2023, the total remuneration decreased by 4.66%, aligning with the reduction rate of employee salaries [para. 5]. The Ministry of Finance has stipulated that salary increases for executives at state-owned brokerages cannot exceed those of their employees [para. 6].
Securities firm executives with annual salaries exceeding CNY 3 million are now a minority within the industry. This shift reflects both market-driven declines in business performance and advancements in income distribution reform amid an overall economic downturn [para. 7]. Discussions about capping salaries in the brokerage sector have intensified recently, with proposals suggesting a cap of CNY 3 million for financial institutions under central or state-owned enterprises [para. 8].
The securities industry's profitability continues to decline for the second consecutive year. Half of the 44 listed brokerage firms disclosed their annual reports for 2023 showed declines in operating income and net profits attributable to parent companies by 1.77% and 7.08%, respectively [para. 9]. Among these firms, China International Capital Corporation (CICC) experienced one of the largest salary reductions [para. 10].
Investment banking is particularly affected by these changes. Net income from investment banking services for 22 listed brokerages decreased nearly a quarter from the previous year. Some brokerages are adjusting personnel within their investment banking departments or laying off staff due to reduced IPO activities and increased competition [para. 11][para. 12].
Research institutes within securities firms are also facing challenges due to reduced market transactions and fee reductions by public funds. Some brokerages have already lowered commission rates for actively managed public mutual fund products significantly [para. 13]. This situation has led to discussions on transforming research institutes' focus towards serving internal needs mainly related to investment banking but faces difficulties due to declining business performance across sectors [para. 14].
Amid these challenges, there is growing concern among core employees and executives about potential caps on compensation within the securities industry. Discussions suggest setting a maximum salary limit at CNY 3 million for personnel at financial institutions under central/state enterprises, including both immediate and deferred parts of compensation [para. 15]. This proposed cap raises questions regarding its applicability across different types of financial institutions and how it aligns with contracts already in place.
Overall, the Chinese securities industry is undergoing significant adjustments due to economic pressures and policy reforms aimed at promoting common prosperity. These changes include widespread salary cuts, layoffs, restructuring within investment banking departments, transformations in research institutes' focus areas, and discussions on capping executive compensation as part of broader efforts to adjust income distribution within this highly competitive sector [para. 16][para. 17][para. 18][para. 19][para. 20].
- First half of last year：
- Research institute starts losing money
- Second half of last year：
- Salary cuts and layoffs begin at research institute
- Early 2023：
- Smaller brokerages implement drastic layoffs and pay cuts
- 2023：
- Average salary per employee at listed brokerages decreases 3% from last year
- 2023：
- CICC experiences significant salary reduction close to 12%
- 2023：
- Several brokerages reduce workforce, including Guohai Securities and Everbright Securities
- 2023：
- Management salaries at 22 brokerages decrease 10.59% year-over-year
- April 2023：
- Half of 44 listed brokerages disclose annual reports showing declining profitability
- 2023：
- CICC average salary per employee drops to 704,000 yuan, largest reduction among 22 brokerages
- July 2022：
- CICC family member posts 'pay slip' online, highlighting high salaries
- 2023：
- CICC total employee compensation decreases 10.4% year-on-year
- 2023：
- Investment banking net income for 22 brokerages decreases nearly 25% from 2022
- August 2023：
- CSRC tightens IPO pace, leading to companies withdrawing IPO applications
- 2023：
- Research institutes face challenges due to fee reductions by public funds
- July 2023：
- CSRC releases public fund fee rate reform plan
- Late February 2023：
- Discussions about capping salaries at 3 million yuan for financial institutions
- 2023：
- Major ministries discuss maximum salary of 3 million yuan for financial institutions
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