Annual ‘High Pay Day’ figures published with warning to employers not to treat new CEO pay reporting requirements as a tick-box exercise.
FTSE 100 CEOs only need to work until just before 17.00 on Monday 6 January 2020 in order to make the same amount of money that the typical full-time employee will in the entire year. The calculation for ‘High Pay Day’ is based on data and analysis by the CIPD, the professional body for HR and people development, and independent think tank the High Pay Centre, showing that: Top bosses earn 117 times the annual pay of the average worker
In 2018 (latest available data) the average FTSE 100 CEO earned £3.46 million, equivalent to £901.30 an hour.
In comparison, the average (as defined by the median) full-time worker took home an annual salary of £29,559 in 2018, equivalent to £14.37 an hour. To match average worker pay in 2020, FTSE 100 CEOs starting work on Thursday 2 January 2020 only need to work until just before 17.00 on Monday 6 January – just three working days (33 hours)
High pay will be a key issue in 2020 as this is the first year that publicly listed firms with more than 250 UK employees must disclose the ratio between CEO pay and the pay of their average worker. Under changes to the Companies Act (2006), firms must now provide their CEO pay ratio figures and a supporting narrative to explain the reasons for their executive pay ratios. The first round of reporting will be seen in annual reports published in 2020.
However, the CIPD and High Pay Centre are calling on businesses not to treat the new reporting requirements on executive pay as a ‘tick-box’ exercise and to use it as an opportunity to fully explain CEO pay levels. They also highlight the need for firms to provide a clear rationale for why CEOs are paid what they are and what is being done to address the issue of fair pay in their organisation more broadly.
The CIPD and High Pay Centre consider this an important step to help build trust in business amongst employees, wider stakeholders and society.
Peter Cheese, chief executive at the CIPD, said: “This is the first year where businesses are really being held to account on executive pay. Pay ratio reporting will rightly increase scrutiny on pay and reward practices, but reporting the numbers is just the start. We need businesses to step up and justify very high levels of pay for top executives, particularly in relation to how the rest of the workforce is being rewarded.
“Greater fairness and openness in pay is essential in building trust, amongst employees as well as external stakeholders and investors. Expectations on businesses behaving and acting responsibly are rising, and greater transparency around how they are treating and managing all their people is a vital part of building long-term sustainability.”
Luke Hildyard, director of the High Pay Centre, said: “How major employers distribute pay across different levels of the organisation plays an important role in determining living standards. CEOs are paid extraordinarily highly compared to the wider workforce, helping to make the UK one of the most unequal countries in Europe.