Christmas is early on Wall Street: High-fliers are stuffing their stockings to sidestep higher taxes under Bill Clinton.

'CHRISTMAS bonuses' on Wall Street, typically paid some time in January or February, are turning out to be just that this year, as US securities firms and their employees conspire to keep what are likely to be record earnings out of the hands of the Clinton Treasury.

Bonuses accounted for as much as 80 per cent of annual compensation for brokers, traders and investment bankers in a banner year like 1991, which saw employees paid more than dollars 20bn ( pounds 13bn) early this year. But with big tax increases on the way next year on million-dollar incomes - both for those who earn them and the firms that pay them - last Friday was another big payday on Wall Street, with many employees opting to take what amounts to their second annual bonus of the year, rather than subject their 1992 earnings to 1993 tax rates.

Many large firms that normally pay out performance bonuses after the New Year - Merrill Lynch, Shearson Lehman, Bear Stearns, Smith Barney and Paine Webber, among others - this year have allowed employees to take at least part of their anticipated earnings before 31 December. (Others, like Salomon Brothers and Goldman Sachs, have given employees and partners this option for several years.)

The employers and their shareholders have their own stake in paying out cash, stock options and other deferred compensation plans before the new administration takes office - President-elect Bill Clinton campaigned on a promise to limit the tax deduction companies are allowed for compensation to dollars 1m per employee.

Earlier this month, for example, Bear Stearns distributed 10 million shares that it had been holding as part of a deferred payment plan, warning that a delay could cost its shareholders dollars 165m in lost tax deductions. Losing the deduction was 'a risk we were unwilling to take,' said William Montgoris, the finance director.

Some 130 senior Bear Stearns executives were the beneficiaries of the share distribution, including the chief executive Ace Greenberg, an outspoken critic of the proposed 'excessive pay' deduction limit. (The limit incidentally will not extend to Wall Street partnerships, notably Goldman Sachs, which until last week was co-chaired by Robert Rubin, Mr Clinton's new national economic adviser.)

But Mr Montgoris insisted that the firm 'wouldn't have done this just to give employees the benefit of a tax-rate differential. This was done with a complete focus on shareholders of the corporation,' he said.

Bear Stearns, like Salomon Brothers in the wake of last year's Treasury auction scandal, has overhauled its employee compensation plans, stressing shareholder value and tying pay more closely to employee performance.

Salaries on Wall Street plummeted in the wake of the 1987 and 1989 market crashes, most notably in 1990, when they fell to an average of dollars 82,000 per employee. Firms have managed to restrain pay rises since then, keeping their compensation bill below 50 per cent of their annual turnover, the industry's rule of thumb. But with all their main businesses - underwriting, trading and retail broking - turning in record performances this year, it is going to be difficult for the industry to hold ranks in the face of competitive pressures and a renewed willingness among its stars to jump firms.

Staff turnover rates so far this year are about 17 per cent, despite the introduction of golden handcuff plans at Merrill, Prudential, Shearson and Salomon designed to increase loyalty, either by tying up a percentage of pay in company shares or through 'longevity' bonuses.

While competition for high-yielding traders and salesmen has not returned to pre-1987 levels, employees and headhunters are only too aware that pre-tax investment bank profits in the past year - an estimated dollars 6bn to dollars 6.2bn - surpass those registered during the 1980s boom years.

'After eight quarters of exceptional profits, it'll be much harder this year to hold the line on compensation,' said Joan Zimmerman, a principal at GZ Stephens, an executive recruiting firm in Manhattan that serves Wall Street. At the same time, growth in profits has levelled off somewhat since the first half of the year, and managers are becoming increasingly cautious of what lies ahead for the industry. Most estimates suggest pay will rise faster than the 5 to 6 per cent growth in industry profits predicted for this year, although it will fall short of the 17 per cent pace of the first six months of the year. Michael Flanigan, who tracks compensation issues for Lipper Analytical Services in New York, predicts overall pay will rise by 13 to 14 per cent this year.

This means that average annual pay is expected to rise to more than dollars 110,000, still well shy of the dollars 150,000-plus bracket mentioned as the target of Mr Clinton's new federal tax increase. Individuals who make more than that amount, or families earning more than dollars 200,000, would see their marginal rate rise from 31 to 36 per cent.

But as Mr Flanigan points out, this figure is an average, which includes everyone from arbitrage traders - who have earned as much as dollars 22m in a single year in the past - to building custodians. Tens of thousands of securities executives will probably see their tax brackets change in 1992, with the prospect that 1993 may not be quite so strong a year.

Indeed, several thousand of the 226,000 people employed in the US securities industry are expected to make seven-figure incomes in 1992, opening them to another Clinton tax proposal, a 10 per cent surcharge on earnings in excess of dollars 1m a year.

The prospect of higher tax rates in 1993 but probably lower earnings for the coming years leaves many executives in a quandary. Financial planners are generally advising clients who took their 1991 income this year to take less than half their 1992 pay before the end of the year, reasoning that a slower 1993 will offset the 5 per cent tax increase.

Others are urging executives to hang on to the portion of their income paid in company shares, noting that taxes on capital gains are unlikely to rise under Mr Clinton, and may indeed fall. But many Wall Street professionals, conscious of the poor performance of their industry's share prices in recent years, are wary of long-term investment in their employers.

Clinton administration officials have refused to comment directly on speculation about Wall Street's tax dodge. When senior executives at Walt Disney cashed in share options earlier this month, citing anticipated tax changes, Clinton spokesman George Stephanopoulos would say only: 'It's a free country.'

(Photograph omitted)