Much has been written about the inequality of salaries, especially those earned by some bankers and top executives. Some of this comes from envious people, although much of the comment has been genuine in expressing frustration at the disparities, and wonder at the cause.

After all, the very reasons put forward for top earners earning such high rewards, are put down to their abilities, which presumably include intelligence. It is therefore fairly safe to assume that they are themselves aware of the issues.

So how did it come about that the top earners in our society are taking home financial rewards that most of our society fervently believe to be quite wrong? Disproportionate. Excessive.


I would like to put forward one significant factor causing this.

The top rate of tax.

Consider the following conversation:

“Hello Mary. We are very pleased with your performance and would like to offer you an increase in salary. How does an increase of 10% sound?"

“Thank you, Peter. I am glad you have recognised my work, and would love to have an increase in salary. I assume the 10% increase you refer to would be on my salary after tax, my take-home pay?

If the increase is before tax, on my gross salary, then it would need to be 12%, otherwise the actual increase in my take-home pay is only 5%."

For this example:

Current salary: £250, 000
Take home: approx £138, 620

Salary + 10%: £275, 000
Take-home: approx £150, 620 5% increase

To increase take-home pay by 10% (ie to £152, 482), the gross salary would need to increase to approx. £279,000 – an increase of 12%.

Please note these figures are rough calculations which cannot take things like the Tax Code into account.

An increase of 12% instead of 10% may not sound like much, but as you can see it makes a big difference in take-home pay and so employees will be demanding the higher increases.

There is a very good chance that my calculations are nonsense... Do let me know what you think