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Another Leg-up for the Frankfurt am Main Financial Center:
Loosening of the Job Security Protections Afforded to Highly Paid Bankers.

A guest contribution by Hubertus Väth, Managing director of the Frankfurt Main Finance Association

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© Christof Mattes Fotodesign / www.herrmattes.de

Owing to the planned Brexit, various financial institutes from London are looking around for a new location within the European Union. The decision of where to move is based on many factors – and one of them is labor law. Now Frankfurt has another point in its favor in the competition for the establishment of new financial institutes.

As announced in the CDU/CSU and SPD coalition contract, the Bundestag and Bundesrat decided in February and March of 2019 – largely unnoticed by the public – to loosen the job security protections afforded to top earners in the financial sector.

In the future, so-called risk carriers will be equal to executives, provided their fixed salary exceeds three times the pension insurance income threshold – in western Germany just over €240,000 a year in 2019. For a planned separation, contrary to a “normal“ employee,  employers no longer have to prove that the employment relationship is completely shattered. A dissolution petition without justification that stipulates a severance payment is sufficient.

This step is consistent with the usual severance payment practice when dismissals occur in Germany, and especially with the peculiarities of the global financial industry: Similarly to professional sports and a lot easier than in most other professions, an individual’s special knowledge, performance and success lead to promotion, responsibility and pay.

At international banks, this is often not expressed in typical employer authorizations or in the management of numerous employees. Therefore, the new rule places the responsibility for personnel management and economic success on the same level. This corresponds in principle to the understanding of the financial industry in places like London, New York or Zurich.

The new law protects against arbitrary acts: It applies only to risk carriers in important institutes according to EU regulations and the German Banking Act, which must be named in advance by management. Risk carriers can be, for example, the managers and decision-makers of essential business sectors, such as trade, sales or the granting of credit, as well as the heads of the legal, financial, IT, risk management, compliance or audit departments.

Important institutes are considered basically  financial institutes with a balance sheet total exceeding  €15 billion as well as those institutes with a lower balance sheet total that the supervisory authority nonetheless classifies as such with regard to their compensation structure as well as the type, scope, complexity, risk content and internationality.

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