Within the first three working days of 2020, a CEO has earned the same amount as the average UK employee’s annual salary (£29,559).
This is according to research conducted by the CIPD and think tank, High Pay Centre.
Changes to the Companies Act, means that firms must now show their CEO’s pay ratio and also explain why their CEO is paid the level they are. There is no fixed deadline for all companies’ reports to be published, still the first report should be published in early 2020.
This rule applies to all businesses with more than 250 UK employees.
The CIPD and the High Pay Centre see this as an opportunity to fully justify and explain CEO pay and not just use it as a “tick-box” exercise.
Peter Cheese, chief executive of the CIPD believes this move could increase trust among employees, as well as investors and external stakeholders.
Mr Cheese 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, among 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.
Andrea Leadsom, Business Secretary said:
Today’s figures will be eye-watering for the vast majority of hard-working people across the UK.
The numbers are better than they were – down a quarter since 2012 and 13% on average since last year – but the situation is still concerning, especially in those cases where executives have been rewarded despite failing their employees and customers.
This data was compiled by using the FTSE 100 CEO pay for 2018.
Darius is the editor of HRreview. He has previously worked as a finance reporter for the Daily Express. He studied his journalism masters at Press Association Training and graduated from the University of York with a degree in History.