Employee morale could be damaged by the ever-growing paychecks of top bosses, as bosses’ salaries continue to grow at a much faster rate than their employees’ pay.
2017 data from stewardship service Minerva Analytics revealed that the CEOs of the UK’s biggest listed companies were on average awarded an 11% pay increase. However, their workers received a raise of just two per cent on average over the same period.
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This means median CEO remuneration has reached £3.93million – but the average salary in the UK is £27,271, according to the ONS.
To keep tabs on the growing pay gap, new government legislation will demand large listed companies to publish and justify pay gaps between CEOs and their employees in the form of a ratio. It will come into effect in 2020.
The High Pay Centre, a UK think tank, explains that this ruling could help address the balance between workers and CEOs. “Public pay ratios will create pressure on companies to close the gap,” the Centre says.
“They will also provide low-paid workers and their trade unions with information that they can use to support their argument for pay increases - when it becomes apparent what executives or the top quarter of earners at a company are earning, it is easier to identify the potential to redistribute pay more evenly.”
However, many believe that just publishing the ratio will not cause companies to change their remuneration strategy without further action.
TUC General Secretary, Frances O’Grady and US Senator, Elizabeth Warren have called for provisions to place workers on Boardroom pay committees so that they can have a greater say over staff salaries. O’Grady adds: “That would bring a bit of common sense and fairness to decision-making when boardroom pay packets are approved.”