Banks, insurers and investment funds are playing a cat-and-mouse game with the British government over tax on bonuses.
Official figures show that firms put off paying £1.7 billion in bonuses until after April 6 – the start of the new tax year – so the highest earners could pay tax at 45% instead of last year’s top rate of 50%.
The Treasury reckons this adds up to a tax saving of £85 million.
The figures come from the Office of National Statistics’ annual bonus survey.
The study shows bonuses were up 1% despite pressure from the government on financial firms to cut pay. The financial sector paid £13.3 billion in bonuses at an average of £11,900 per worker.
Non-financial firms paid £23.6 billion, with oil and gas workers picking up the highest amounts, averaging £6,700 each.
Manipulating the rules does not stop with deferring bonus payments.
A separate survey from specialist financial recruitment head-hunter Robert Half reveals banks, insurers and funds have pushed up salaries for key staff as they expect a cap of bonus payments to hit the industry hard.
The European Union law will cap a bonus at twice the level of salary.
To counter this two-thirds of financial firms have put up salaries for their key workers by around 20%.
The research also reveals that financial firms have tasked human resources staff and lawyers to probe for loopholes in the new rules so they can pay the best wages to key staff.
The recruiter claims many European financial firms fear losing their best staff to foreign rivals who operate without salary or bonus restrictions.
“Other options some financial firms are considering include how they can increase benefits, like allowances, pensions and cash spent on company cars to make a more attractive remuneration package,” said the Robert Half report.
The new EU laws will affect thousands of financial workers across Europe, but most are based in London, as one of the world’s major financial centres.
The bonus cap is expected to hit anyone earning more than £425,000 a year.
The survey found that 93% of financial firm executives are concerned about losing staff to non-European rivals. The rules affect any bank with headquarters in the European Union, regardless of where the worker is based in the world.
The EU explained they are targetting financial services workers with the bonus cap as earnings without a limit have encouraged some to take unnecessary risks.