Goldman Sachs is kickstarting the controversial City bonus season by considering whether to defer bonuses into the new tax year in April – when the top rate of income tax falls to 45% from 50%.
A number of banks are known to have considered whether to make the move, which would save their top employees thousands of pounds. But City sources believe many of them have rejected the idea to avoid any negative publicity in the wake of the row surrounding corporation tax paid by Starbucks in the UK.
The Wall Street firm – which publishes its full year results on Wednesday and tells staff their bonuses for 2012 shortly afterwards – is not thought to be considering changing the way the bonuses for 2012 are handed out. The proposal being considered would benefit parts of bonuses deferred from the years 2009, 2010 and 2011, which are due to be handed to staff this year in the form of shares.
The bank is not thought to have decided whether to press ahead with deferral of the shares early in to the new tax year on 6 April. But it has already attracted attention for paying some deferred bonuses early in the US to avoid a hike in tax rates. The firm paid out about £40m in so-called restricted stock in early January just as the "fiscal cliff" budget talks led to taxes being raised – and despite earlier remarks by Goldman chief executive Lloyd Blankfein that "tax rises, especially for the wealthiest, are appropriate". Goldman refused to comment on Sunday night.
It is regarded as one of the most generous payers in the City and forecast to have a bill of just over £8bn to pay its staff for 2012, slightly more than 2011 when the average per employee was about £238,000.
Goldman is among a number of major Wall Street players announcing results next week – along with Citigroup and JP Morgan.
In the UK, employees at bailed-out banks Lloyds Banking Group and Royal Bank of Scotland will benefit from the lower top tax rate as the bulk of their bonuses are not paid until June at the earliest. This is in line with the pay regime from previous years agreed with UK Financial Investments, which controls the taxpayer stakes in the bailed-out banks and limits cash bonuses to £2,000.
The cash bonuses are paid in March but subsequent sums in shares are deferred into June and subsequent months.
Deferral of bonuses over at least three years has been demanded by regulators such as the Financial Services Authority as a way to make employees less likely to run huge risks for a single year and to allow banks to claw back any bonuses if performance turns sour. Such clawbacks may be a feature of the bonus season because of the waves of scandal to hit the industry ranging from payment protection insurance mis-selling in the UK to fines for Libor fixing and money laundering.
