The median earnings of FTSE 100 CEOs for the year 2024 have already exceeded the average annual salary for a full-time worker in the UK, according to research conducted by the High Pay Centre (HPC).

The HPC estimates that top CEOs outearned the median annual salary for a typical full-time worker in the UK by approximately 1 pm on Thursday, January 4, marking the third working day of the year.

Andrew Speke, head of communications at the HPC, explained that the surge in executive pay over the last four decades, particularly tied to shareholder returns, has played a significant role in the widening pay gap.

Weakening worker and union rights, leading to lower trade unionisation, have further contributed to these disparities, both undermining worker pay growth and enabling extravagant rewards for CEOs.

As of now, the median FTSE 100 CEO pay (excluding pension) stands at £3.81 million, which is 109 times the median full-time worker’s pay of £34,963. This represents a 9.5 percent increase in CEO pay from March 2023, while the median worker’s pay has seen a 6 percent increase during the same period.

Is the high pay justified?

A spokesperson from the Confederation of British Industry (CBI), a business interest group, emphasised that high pay is only justifiable when matched by exceptional performance. The CBI urged firms to transparently demonstrate the link between executive pay and the delivery of company strategy, especially in the face of a serious cost of living squeeze.

The report also highlights that other FTSE 350 executives, with a median pay of £1.32 million, will need to work until January 10 for their pay to surpass the annual pay of the median UK worker. Partners at prestigious ‘magic circle’ law firms, earning an average of £1.92 million, would need to work until January 8, while partners at ‘Big Four’ accountancy firms, with an average pay of £871,000, would need to work until January 16.

The calls for increased CEO pay last year culminated in adjustments to executive pay guidelines by Legal and General Investment Management in December 2023, allowing firms to offer more generous incentive payments. The London Stock Exchange chief executive had earlier argued that low CEO pay levels pose a risk to the UK economy.

What about rising inflation and the wage squeeze?

The figures come amid concerns about rising inflation and a prolonged wage squeeze. The latest Office for Budget Responsibility forecasts indicate that real wages may not recover to their 2008 value until 2028. Trades Union Congress general secretary Paul Nowak emphasised the need for prioritising workers in pay rises, advocating for an economy that rewards work and fair wealth taxation.

The HPC’s calculations are based on its analysis of the most recent CEO pay disclosures published in companies’ annual reports, combined with government statistics showing pay levels across the UK economy. The widening pay gap raises questions about the fairness and sustainability of current compensation structures in the corporate world.

 

 

 

 

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Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.