The coalition government is considering whether to introduce a second tax on bankers’ remuneration and profits and proposes to start a consultation on whether to make employers disclose their pay rates.
The news came as research undertaken by recruitment agency Badenock & Clark revealed that, while nearly half of financial services organisations had committed to cutting bonuses this year, two out of five believed that such a move could affect their ability to attract the top talent.
Just under a quarter of respondents were worried that they would struggle to recruit the best staff because they were not offering high enough salaries, even though seven out of 10 said that personnel would need to work longer hours in future.
Some three out of five employees indicated that this was already the case, while just over two thirds expected their working hours to increase still further over the coming months. The main reason for their increased workload was redundancies, with 40% of staff indicating that they were having to pick up additional work as a result of staff cuts.
Guy Emmerson, associate director for banking and financial services at Badenock & Clark, said: “Until sector confidence is fully restored, employers will be reluctant to return to the high salary and bonus levels of the past, not only from a financial point of view, but perhaps just as importantly, from a PR point of view.”
But the situation could become even more tricky if the coalition government decides to introduce a second banking levy on top of the £2 billion tax announced in last month’s Budget.
According to the Daily Telegraph, Mark Hoban, the Financial Secretary, said in a speech to the British Bankers’ Association earlier this week that he proposed to change their remuneration system as “a key way of regaining public trust”.
The aim is no longer to reward employees based on “short-term performance, whilst leaving investors and taxpayers exposed to the long-term risks”, he added.
“It is better for the industry to lead these changes, but there is a role for the government too. We will explore the costs and benefits of a Financial Activities Tax on profits and remuneration, and we will ask the FSA [the soon to be disbanded regulator, the Financial Services Authority] to examine further options in the forthcoming review of its remuneration code,” Hoban said.
The Treasury also plans to consult on how a new “remuneration disclosure regime” could be brought in to cover the entire financial services sector.