Pay rates for senior management reflect longer working hours argues CMI

Business Secretary Greg Clark proposed new laws in Parliament yesterday (June 11^th) that new large firms will have to justify their chief executives’ salaries and reveal the gap to their average UK worker. It means that for the first time, UK listed companies with more than 250 UK employees will have to disclose and explain this difference – known as ‘pay ratios’ – every year. However, according to data published today by the Chartered Management Institute (CMI) and XpertHR, basic salaries for senior managers have fallen in real terms, with inflation overtaking pay increases for the first time in five years. At a time when government are shining a light on executive pay, and linking it via a ratio to workforce pay, separate CMI research has found managers worked an extra 44 days a year last year over and above their contracted hours – up from 40 days extra in 2015. The same research found 59 percent of managers are ‘always on’, frequently checking their emails outside of work and one in 10 had been forced to take sick leave because of stress.

Petra Wilton, director of strategy for CMI, said: “This is a huge shock to the system for British business just as Government are proposing to shine a much-needed light on the pay ratio between the top and the workforce.

“The UK is at risk of sleepwalking into a new productivity crisis because too many managers are chronically overworked and stressed by an ‘always on’ culture.

“If businesses can no longer attract talent through large pay packets alone they need to be far more creative in providing an environment that will motivate, retain and attract ambitious managers.”

All tiers of management, from entry level professionals to top executives, suffered a slowdown in 2017. Basic salaries increased by just 2.4 percent to £34,526 – which is below the Consumer Price Index (CPI) rate of 3 percent for the corresponding period. This represents a salary cut of 0.6 percent.

In addition, directors have seen average bonuses slashed since last year by 16 percent, from an average of £53,504 to £44,987

Over the past five years, senior managers and directors have averaged 3.9 percent annual pay increases – equating to 2.3 percent in real terms. Now CMI/XpertHR data from 128,582 managers and professionals indicates those above-inflation increases have come to an end.

Wilton, continues:“This is today’s problem and cannot just be swept under the rug. Britain needs 2m more managers by 2024 on top of the existing 3.6m if it is to meet the demands of a post-Brexit economy, so it is imperative that businesses wake up and improve the workplace environment.

“To attract the necessary talent, businesses must focus on the softer, but no less important, workplace benefits. This means improving employees’ work/life balance, protecting wellness, giving them training and development opportunities, and fostering a sense of purpose and meaning in their jobs.

“Those are actually far more powerful drivers of employee engagement than money, so this is a great opportunity for employers to reset their thinking about how to attract, motivate and retain their senior talent.”

“There has been a sharp divide in the rewards on offer to senior managers and almost everyone else over recent years said Mark Crail, content director for XpertHR. “Where those at the top have forged ahead, the rest have seen their pay eroded by below-inflation ‘increases’. The picture now appears to be slowly changing – and, on the whole, pay awards are now at or above the level of inflation. But there is a long way to go to restore any sense of balance in how rewards are shared around in many companies and the accumulated difference remains wide, raising serious questions of fairness and equity.”

The Managers and Professionals Salary Survey also found that 90 percent of employers experienced problems with recruitment over the last 12 months. The most common reason was difficulties in finding key skills, experienced by three-quarters (76 percent).

While down on the last two years (when it was 86 percent and 87 percent) this remains high compared to just a few years ago, having soared from 49 percent in 2011. Three in 10 employers this year said that reward packages are too low to recruit high-quality applicants.