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Remuneration practices: call for evidence – GOV.UKBack

HMTreasuryBelow are 17 questions covering the evidence the HM Treasury department would like to gather in relation to remuneration. The questions are divided into 4 sections and the government invites views on the questions posed from anyone with an interest in remuneration packages, particularly employers, payroll providers, HR and remuneration specialists, tax professionals and advisers and businesses, across all sectors and employer sizes.

The primary aim of this call for evidence is to improve the government’s understanding of the wider picture around remuneration, including the factors and issues that influence businesses’ and individuals’ decisions in awarding remuneration and the types of remuneration.

The focus of this call for evidence is on remuneration of individuals who are employed i.e. employees and directors.

Please also provide further comment if there are areas not covered by this call for evidence that respondents feel are relevant to inform the government on remuneration practices.

Questions

Each question is listed below. Please answer each of the questions as truthfully and succinctly as possible.

Section 1: What different forms of remuneration make up your remuneration packages?

Question 1
Do you agree with the definition of ‘remuneration’ as set out below?

 

 

Remuneration is the compensation an individual receives in exchange for the work or services they provide, sometimes called reward. In tax legislation, this is defined as employment income, in National Insurance legislation it is defined as earnings. Remuneration can be in the form of cash or might be non-monetary such as access to benefits in kind or increased entitlements from their job e.g. to leave or flexible arrangements. The structure of compensation might relate directly to an individual’s characteristics or performance at work or be available more broadly to whole workforces or specific types of worker.

Remuneration includes:

  • Regular pay in the form of salary or wages;
  • Variable pay linked to individual, group or company performance such as bonuses or other cash incentives;
  • Non-cash incentives and perks including extended leave or flexible working arrangements;
  • Allowances such as those to cover removal or relocation and other private expenses;
  • Benefits in kind such as travel and retail vouchers, childcare vouchers, clothing, company cars, equipment for home-working, loans, travel and subsistence payments, telephones, activities, and special events;
  • Reimbursements where the employer meets an employee’s private expense
  • Loans from employer to employee;
  • Employer pension contributions; and
  • Employment related shares and securities.

Question 2
Are there additional forms of remuneration that you consider are relevant to current practice?

 

 

Question 3
Are there benefits in kind or other payments that you feel should not be treated as remuneration for tax and/or National Insurance purposes?

 

 

Question 4
Have you changed your remuneration package in recent years to include any of the above or other awards? If so, which of the above or other rewards do you now offer?

 

 

Section 2: Why are different forms of remuneration used?

Question 5
If you have changed your remuneration package, why have you done so and when did you do this?

 

 

Question 6
When changing your remuneration package, was this is to achieve one or more of the following, if so please indicate which:

  1. To attract, recruit and retain an effective workforce;
  2. To promote work-life balance and support employee health and wellbeing;
  3. To motivate or incentivise desired employee behaviours and encourage good performance;
  4. To share the success of the business with employees; and
  5. To reduce costs. Some forms of remuneration can be cheaper to provide than salary.


Question 7
Do you feel there are other considerations missing from the above list?

 

Question 8

Why do you or would you offer plans involving employment-related securities used in remuneration packages?

 

What are the advantages of these plans compared to other forms of remuneration?

 

How effective are these plans in incentivising employment performance?

 

To what extent is this form of remuneration driven by the current tax treatment?

 

Do you award securities and shares not available to non-employee investors and which enable an employee to benefit from growth or rights in excess to those available to non-employee investors? If yes, why do you award these?

 


Employee Influence

Question 9

Do you offer individual employee remuneration packages?

If yes:
How far do your employees preferences drive the packages you offer?

 

How does bargaining power vary according to an individual’s status in your company?

 

What is your take up of different forms of remuneration?

 

In addition to employers’ objectives and individuals’ preferences, the government recognises that there are external factors that influence the composition of remuneration packages. These include:

  • Legal and employment obligations such as Transfer of Undertakings (Protection of Employment) (TUPE) or other employment right legislation;
  • Income tax, capital gains tax and National Insurance or other tax obligations;
  • Competition with other employers who offer similar packages; and
  • Economic conditions, trade unions, international pressures and cultural considerations.

Question 10
Are your remuneration practices driven by the above external factors, in particular what impact does the current tax treatment of different forms of remuneration have on remuneration packages?

 

 

Are there other factors that you consider relevant?

 

 

Section 3: How are these different forms of remuneration provided?

One key trend in the provision of remuneration over recent times has been the growth in dynamic remuneration practices such as flexible and voluntary remuneration practices. Where in the past reward strategy was set, implemented and did not accommodate the priorities of an individual employee, flexible and voluntary packages now allow individuals to tailor remuneration to their needs and can change over time.

Question 11

Do you offer much flexibility in your remuneration packages and at what stage in an individual’s career are these more or less likely to be offered?

 

 

Question 12
What kinds of remuneration do you usually offer flexibly or on a voluntary basis? How do these arrangements work in practice? How are these arranged?

 

 

Question 13
Why do you offer flexible or voluntary packages and what is the take up of these?

 

 

Question 14
Do you offer forms of remuneration through salary sacrifice arrangements? Does the difference in valuation of benefits for tax purposes play a part in which ones are offered?

 

 

Question 15
Why are these salary sacrifice arrangements in place; how far are tax and National Insurance considerations important? Where possible, please provide evidence to quantify this.

 

 

Question 16
Do you see a distinction between salary sacrifice arrangements and arrangements where benefits in kind that are automatically provided on top of salary are sacrificed for a cash alternative?

 

 


The government wants to ensure that taxation policy does not create future distortions in the labour market. A fair and sustainable tax system for the future will also need to respond to and support remuneration practices as they evolve. Therefore it would be helpful to understand whether respondents expect trends to continue or change and whether you foresee other pressures or issues influencing this landscape.

Question 17

How do you expect remuneration practices to change in the future? What are the contributing factors to this? Are there areas of the tax treatment of remuneration that the government should explore further?

 

 

Any questions you cannot answer or are not applicable please indicate this with N/A in the appropriate text box. Answers should be submitted by 11 August to Katy Recina, RMI Policy Officer via katy.recina@rmi.co.uk or:

Katy Recina
Policy Department
201 Great Portland Street
London
W1W 5AB

 

Posted by Sue Robinson on 22/08/2014