I am not surprised by the poll results - senior executives have the muscle power within organisations to influence their packages, even though indirectly. This raises another issue about ‘who' decides senior executive pay and benefits in the first place-but that is for another time. Often you hear top executives saying that if the tax regime is too punitive in the UK they will go elsewhere.
I suspect, however, if data were available about mobility of senior UK executives, we would find that this doesn't actually happened very often-most are not as much ‘in demand' as they think they are. This argument for a reward strategy is probably true, however, for executives coming from abroad, from countries with lower tax rates, who might be tempted to go to a more tax-friendly country. At the moment, though, there are a number of countries introducing similar hikes for their higher rate taxpayers, so there are more limited options now than pre-recession.
I think we do have a tax problem in the UK but it is not so much about the 50p but about a tax system where, not far above the average wage, ordinary employees are taxed at 40p. In the US, for example, there is a much more gradual progression of the tax thresholds so that the average worker can retain more of his/her earnings free of tax.
This is the real de-motivator in the UK tax regime, and not so much the 50p above £150,000. In terms of the question of whether we should have a reward strategy for those earning over £150,000, the real question that HR ought to ask is ‘why'?
If tax regimes in other countries are moving in the direction of higher taxation, given their enormous deficits, what are we trying to achieve by offering enhanced compensation? Each organisation has to ask this question, and come up with a rational reason for it.
