Contract recruitment trends in Compliance and Financial Crime

The contract jobs market for compliance and financial crime professionals was relatively subdued in 2023. A combination of tighter budgets and more prudent hiring saw demand for contractors and temporary resource staff drop as organisations committed to streamlining costs.

Subsequently, there has been an influx of contractors into the market over the last 12 months due to fewer opportunities being available after existing long-term projects ended.

This trend was evident within the fintech space, for example. Investment in the sector jumped sevenfold in 2021 to $37.3 billion (£29.8 billion). Demand for contractors therefore rose significantly as fintech firms hired interim staff to help guide them through key authorisation processes to start trading in the UK.

But according to KPMG, fintech investment plummeted 60% year on year in 2022, with a further 57% drop in the first half of 2023. As funding has dried up, we have seen a resulting decline in demand for contractors in this area.

Overall, however, specific projects are still the primary driver behind the use of contract recruitment services across compliance and financial crime functions. The most common projects where support is needed are regulatory audits and regulatory change preparation, as well as systems implementation and remediation.

Primary reasons for using interim, contract and
co-source staff

The long-term effects of IR35

Over the last few years, our salary surveys and market reports have tracked how employers and candidates have navigated the IR35 reforms that were introduced in April 2021.

Our data suggests that while the immediate impact of the changes appeared limited, some longer-term trends are beginning to emerge.

Among candidates, for instance, there has been a significant rise in the number of contractors who are open to taking on permanent roles since IR35 came into force.

In 2023, two-thirds of professionals (67%) had either considered or accepted a permanent job, compared with just 18% who said the same a year earlier.

If this trend continues, talent shortages may become more prevalent across the interim market, particularly as many larger organisations have taken a blanket approach to IR35 reforms.

“Once the changes were introduced, most big banks and financial services firms chose not to engage with ‘outside IR35’ contractors,” says Michael Cunningham, Executive Consultant at Barclay Simpson.

“That stance hasn’t really changed. So what may happen as a result is that talented contractors begin to shift away from traditional banks and favour smaller organisations who are willing to offer more flexible and lucrative terms.”

Key trends affecting Compliance and Financial Crime recruitment in 2024

Various political, economic and social factors are likely to have an impact on permanent and contract hiring across the compliance and financial crime space in 2024.

Junior talent shortages

In our 2023 salary guide, we noted that junior hiring, graduate schemes and internal promotions had suffered major setbacks due to organisations delaying or halting their recruitment activities during the pandemic.

This created a shortage of skilled candidates at the entry level, as well as a lack of adequately trained junior professionals ready to step up into AVP and Associate roles.

Over the past 12 months, very little has changed. Finding high-quality junior candidates continues to be a challenge, and we’re beginning to see how different organisations are trying to tackle the problem.

Nearshoring and offshoring have become increasingly common, with certain compliance and financial crime activities being outsourced to locations such as India and Poland. Some firms are also ramping up automation and AI projects to handle more routine tasks.

While this may partly solve the immediate problem of filling empty roles, it could lead to longer-term talent shortages in the future, with junior candidates prevented from gaining the experience and technical skills they need to progress their careers.

New regulations and sanctions

The introduction of new sanctions and regulations is often a key driver of hiring within compliance and financial crime, and 2024 is likely to be no exception.

Over the last 12 months, a series of regulatory changes were announced, including the Edinburgh Reforms – a set of 31 measures aimed at making the UK a more attractive investment destination.

At the time of writing, 22 of the 31 reforms have been completed. While a Treasury Select Committee recently described the implemented changes as a ‘damp squib’, upcoming reforms to the PRIIPS regime and MiFID II reporting rules are expected
to make a bigger splash.

Meanwhile, the new Consumer Duty, which came into force on July 31 last year, means financial services firms in the retail space are facing greater FCA scrutiny over how they protect customers.

Retail banks, fintechs, CFD brokers and spread betting firms are among the organisations that will therefore require skilled regulatory compliance professionals with expertise around conduct rules to help them navigate these changes. Finding people who recognise what response is appropriate for the size of the business is often where the difficulty lies.

Within the sanctions space, the Russia-Ukraine war continues to fuel activity across Europe and the US.

In December, the UK Government created a new Office of Trade Sanctions Implementation to crack down on any companies currently skirting Russian sanctions. The same month, it also announced new sanctions on businesses in China, Turkey, the UAE and Serbia that are part of Russia’s military supply chain.

As such, true sanctions specialists remain in high demand. Those who have a mix of strong advisory skills – often from a legal background – and specialist monitoring skills are particularly sought-after. These professionals can help organisations understand how certain business activities in countries not subjected to sanctions can still inadvertently fall foul of the law.

Inclusion and diversity

In September, the FCA and PRA published new proposals to improve inclusion and diversity in the financial services sector. The requirements set out for firms include:

• Developing a strategy detailing how companies will meet their inclusion and diversity objectives and goals.
• Collecting, reporting and disclosing data regarding certain protected characteristics.
• Setting targets to address under-representation.

With clear guidance and instructions now in place, we expect 2024 to be a year in which many financial services organisations revisit and refine their diversity and inclusion policies and hiring practices.

Encouragingly, the vast majority (88%) of employers believe their organisation has a culture that supports equality, diversity and inclusion. The gender split across compliance and financial crime is also generally well balanced, although there remain some areas, such as surveillance, which are still largely male dominated.

Less focus has traditionally been placed on other protected characteristics, including ethnicity and disability. This could be why only 67% of candidates agree that their company’s approach to inclusion and diversity is adequate, indicating a disconnect between the perceptions of employers and employees.

Post-pandemic attitudes to flexible working

It is now nearly four years since the UK first went into lockdown in March 2020 due to the Covid-19 pandemic. At the height of the crisis, remote working was a necessity for many organisations if they wanted to continue doing business, and many adapted their policies and processes quickly during a time of great difficulty.

But what lasting impact has this era of increased flexibility had on the workplace?

Nationwide, four in every ten employers have reported a rise in flexible working requests since the pandemic. Our data shows a similar pattern, with 29% of employers saying they are receiving more part-time and flexible working requests from compliance and financial crime professionals.

The number of candidates who claim they would consider leaving a job if they weren’t allowed their preferred hybrid working model has also remained broadly consistent from last year (70% in 2023 versus 72% in 2022).

But despite the clear demand for flexible working from employees, our consultants are reporting that organisations want staff back in the office more.

“Whereas two days in the office was previously the norm for many firms, a lot more are expecting a minimum of three days now, and it’s becoming mandatory,” says Jane McKechnie, Executive Consultant at Barclay Simpson.

“We’re also seeing companies amend their work-from-home policies and phase out certain flexible working options that were offered during the pandemic.”

It is worth noting, however, that nearly all (97%) employers still offer some form of hybrid or remote working, with 69% of candidates saying they are permitted to work from home at least three days a week.

What we are likely experiencing is a ‘bedding-in’ period, as organisations look to adopt a hybrid model that strikes a good balance between business performance and employee expectations.

For example, on the one hand, better flexible working options have created more full-time opportunities for women and disabled employees since the pandemic. On the other hand, some staff, particularly junior professionals, claim they are missing out on vital training and feel less connected to their colleagues.

Finding the right balance could prove to be tricky, but employers are at least aware of the hiring challenges they face if their remote working policies are too inflexible.

In 2023, 37% of organisations admitted their current flexible working approach was causing recruitment and retention issues – up from 29% the year before.

This figure could climb even higher in the coming years, given that more than a fifth (22%) of compliance and financial crime professionals currently cite remote working or a better work-life balance as their top reason for seeking a new role.

Salary and bonus trends

While starting salaries in 2023 did not experience the meteoric growth seen over the previous two years, they continued to rise in line with market expectations. 

A period of stabilisation was to be expected after the whirlwind of hiring activity that occurred after the pandemic, but employers recognise the challenges of finding skilled candidates and are still willing to pay for the right person. 

The outcome is that salaries across most of the markets and roles we cover have remained resilient, despite organisations tightening their recruitment budgets. This is partly explained by the fact that employers are fighting hard to retain their best staff. 

“Buybacks and counteroffers are more widespread today than I’ve seen in a long time,” says Nick Evans, Principal Consultant at Barclay Simpson.

“Candidates are savvy and understand that if they look for new roles, their employer is likely to come back with a more generous offer to prevent them from leaving.”

However, starting salaries for junior candidates are more volatile and unpredictable. On the buy-side, for example, talent shortages and huge post-pandemic hiring demand caused junior starting salaries to soar at asset managers and hedge funds. Most firms now have well-stocked compliance and financial crime teams, with some even looking to trim down their workforce after over-hiring. 

“A number of junior candidates are having to adjust their salary expectations once they re-enter the market. There just aren’t as many roles available at their level anymore,” explains James Boxall, Principal Consultant at Barclay Simpson. 

Employers intend to increase base salaries for existing employees by 6% in 2024

With salaries stabilising over the past 12 months, more employers are confident their salary bandings are now in line with market expectations. Currently, 78% of organisations believe what they can offer is ‘very’ or ‘somewhat’ aligned with candidates’ demands. 

When it comes to bonuses, 2024 is expected to be a lean year for the banking industry. Nevertheless, 86% of organisations indicated they are likely to offer bonuses this year – only a modest drop from the 89% who said the same in 2023. 

Regarding benefits, we typically see larger organisations provide better benefits packages with more options around what employees can use or take. Smaller businesses, meanwhile, tend to have greater flexibility on bonuses but are more likely to offer basic benefits.

Across the board, more organisations are including a suite of wellness benefits to support the mental wellbeing of employees. Moreover, holiday allowances are beginning to improve, with at least 25 days now considered the norm and many businesses offering 30 days. 

“People are now used to working from home, so firms may need to get more creative with benefits if they want to differentiate themselves and entice staff back into the office,” says Jane McKechnie, Executive Consultant at Barclay Simpson.

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