The 50% income tax rate announced in yesterday’s Budget is bad for jobs and employment, according to Albert Ellis, chief executive of Harvey Nash. 

Ellis told Recruiter that the rise in income tax on salaries of more than £150,000, which comes into force in April 2010, will have a particular impact on Harvey Nash’s UK candidates at the senior end, most of whom start on a basis salary of £120k.

“Candidates will require an inflationary premium to move because they are going to want some sort of compensation - that’s normal,” says Ellis.

“Anything that stops people taking jobs is bad. Where you have got companies having to compensate candidates for the higher tax rate slows the process down and creates barriers to employment.”

The income tax rise will also have a negative on entrepreneurs in the industry, he argues.

“If you are talking about people being more productive and incentivised to work harder - the entrepreneurs of this world - it is taxing them. The recruitment industry has a fair share of owners and entrepreneurs who have made a lot of money out of the industry.

“Most successful recruiters are in the high-earning bracket. It’s going to affect the successful recruiter -  those earning in excess of £150k.”  It will affect morale, Ellis adds.

“At the new 50% for higher earners, the UK will not be a tax-friendly state any longer, it will be a high-tax state.

 “It was hailed as a budget for jobs but this was complete spin because they are going to make job cuts in the public sector.

“This budget is a very negative budget. It talks about two things: debt and tax raises.”

Ellis says one effect may be that bonuses are paid early before the tax increases come into effect in April 2010. This already been raised at Harvey Nash, “where people have asked ‘can we look at timing?’ ”.