Although renumeration for top executives at large public companies jumped 50% in the last year to £2.7 million, pay deals for the rest of the workforce languished at about half current inflation rates of 5.2%.
A report by Incomes Data Services indicated that the huge leap in earnings for directors of FTSE 100 companies meant that they were, on average, taking home just shy of £2.7 million each in salary, benefits and bonuses. The jump was even higher than that of chief executives, who saw their package increase by a slightly more modest 43%.
Steve Tatton, editor of the IDS study, said: “Britain’s economy may be struggling to return to pre-recession levels of output, but the same cannot be said of FTSE 100 directors’ renumeration.”
He added that he expected to see closer scrutiny of pay awards in future, with renumeration committees having to ensure that were able to provide “full and thorough justifications” for the level of bonuses awarded.
While executive’s base salaries rose by only 3.2% this year, their bonus payments increased by a significant 23% to £906,000. But even basic pay figures were higher than the median pay settlement for the average private sector worker which, IDS indicated, was a mere 2.6% – exactly half of current consumer price inflation rates.
The majority of public sector workers, on the other hand, were subject to pay freezes, although research conducted by the Unite union revealed that nurses and social workers had suffered a real-terms pay cuts of £2,000 and £3,000 respectively over the last two years.
Pay-outs down
Unite general secretary Len McCluskey said: “Institutional shareholders need to exercise must greater scrutiny and control of directors’ pay and bonuses. The Government should be strongly considering giving shareholders greater legal powers to question and curb these excessive renumeration packages.”
He added that the union backed the TUC’s call for worker representation on corporate renumeration committees in order to introduce “a much-needed sense of reality”. The trade union umbrella organisation has also suggested that the Low Pay Commission recommend raising the national minimum wage next year at a higher rate than inflation.
According to forecasts by the Centre for Economics and Business Research, meanwhile, bonuses for City workers will fall by a huge 38% during fiscal year 2011/12 to £4.2 billion. This means that pay-outs will stand at just over a third of their £11.6 billion peak before the recession in 2007/8. They have not hit lower levels since 2002/3.
The think tank attributed the drop in payments to turmoil caused by the Eurozone debt crisis, which has constrained financial activity; the poor third quarter results reported by several major banks; the prospect of stricter regulation and the loss this year of 27,000 financial sector jobs.
The trend towards renumerating staff through higher salaries and lower bonuses also had its part to play, it added.
The Cebr likewise predicted that total bonus payments would remain broadly flat in fiscal year 2012/13 before starting to recover along with the global economy the following year. Nonetheless, it forecast that pay-outs would remain below recent highs until at least 2015/16 and were unlikely to return to former peaks any time in the foreseeable future.
