Banking sector HR directors should be taking action now to prepare for April’s Finance Act, which includes the controversial one-off tax on bonuses, experts have warned.
Although full details of the Act will not be confirmed until next month’s Budget, consultancy Mercer said businesses should consider several measures in advance of implementation of the law, which will see discretionary bankers’ bonuses of more than £25,000 subject to a one-off 50% tax.
HR chiefs can prepare by identifying which segments of the workforce might be affected by different elements of the tax changes; considering bringing forward some components of reward if possible; and promoting to employees that pensions are a tax-efficient form of investment.
The call followed a recent Mercer poll of 200 HR directors, which revealed that 39% had failed to investigate the impact of the Act on their staff.
Hannah Perera, principal in Mercer’s Human Capital arm, said: “The impact that the Finance Act will have on executive pay, benefits and motivation hasn’t been fully appreciated.
“The impact on the unprepared will be profound – even the loss of one senior executive to an overseas competitor can have severe implications for a company’s competitiveness. Organisations should already be anticipating and responding to the changes. The April deadline is fast approaching.”
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Mercer warned that the current situation is very different to previous high-rate tax moves in the 1970s and 1980s. During these decades, there were plenty of tax planning opportunities but less workforce mobility – the reverse of today’s situation, it said.
It emerged today that Lord Myners, the City Minister, has written a letter to the heads of investment at large fund managers in the UK last week, asking what they had done to engage with banks over their bonus decisions, and what criteria they would use in deciding how to vote on banks’ remuneration reports.
