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As fears of mass firings descend on Wall Street, where securities firms are reducing costs amid market doldrums, bankers and traders in Canada can afford to be smug, knowing they are likely safe because they're just to expensive to cut loose.

It costs far less to fire someone working in a high-paying securities industry job in America than in Canada. According to one senior securities industry executive, the cost of letting someone go to downsize in the U.S., based on a $1-million compensation package, is about a third of what it would cost to cut that same person loose in Canada.

The reason is a fundamental difference in Canada's employment laws that make the payout due to an employee sent packing a whole lot larger. That keeps employers from staffing up too much in booms, and cutting back big-time in busts.

As a result, while Wall Street is enduring what the Wall Street Journal called the "summer of pain" as banks cut back to deal with lower transaction volumes, Canada's bankers and traders may be somewhat immune.

Canada's employment laws require payment in lieu of notice, and that payment includes the cash portion of the person's bonus. Notice is on a case-by-case basis, but a person with a dozen years experience can expect something like a full year's base pay as well as the cash portion of a full year's bonus as compensation for a being let go on short notice.

Bankers and traders in Canada can also expect to receive their so-called "stub bonus," or the cash bonus money they have accrued for the portion of the year they worked before being let go.

On Wall Street, there's no requirement for notice. What's more, employers can even walk away from the stub bonus, though some say they won't do so.

"The Americans have a different view of the world," said Robert Colson, a lawyer who has litigated some high profile compensation cases in Canada. "The Canadians tend to be gentler and they try to achieve a balance between the employer and the employee."

It's also tougher in Canada to cut an employee's pay in hopes that they will go away. Too much of a pay cut and the employer is likely to end up in court fighting -- and likely losing -- a constructive dismissal case.

The exception is at firms where there's a direct drive relationship between business a banker or trader brings in and bonus. That's a common set up at boutique firms in Canada. In that case, no business, no bonus. For that, there's no need to fire someone to cut costs, because you're not paying them anyway. They work largely for free until the markets come back.

For those reasons, employment figures on Wall Street tends to be much more like a yo-yo than on Bay Street.

In the U.S., there's little downside to staffing up in good times, knowing that it's easy to prune in slower times. In Canada, executives have to look far ahead because they know they will be stuck with employees even in lean years.

In each of the last two downturns, according to the New York State Comptroller, the industry has contracted by about 20 per cent.

By comparison, when employment in the Canadian securities industry dropped after the last two market crashes -- the global financial crisis and the tech bubble -- the declines were much more modest, at about 5 to 6 per cent.

That discipline may also contribute to increased efficiencies at Canadian investment dealers, where revenue per employee has risen to $398,000 in 2010 from $311,000 in 2000.

The cost differential between Canada and the U.S. is shrinking a bit thanks to the move to deferring chunks of employee bonuses. The contracts for deferrals specify the circumstances under which that pay is forfeited, and being fired is often one reason to lose that compensation.

Still, even with more pay deferred, it will never fully close the gap between the cost of cutting an employee in Canada and the U.S., Mr. Colson said.

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