Executive pay rising faster than for other employees

Executive directors have seen pay rises above the level set for other employees, sparking concerns that the gap between pay for executives and other workers is set to grow again.

According to professional services firm Deloitte’s “Executive directors’ remuneration” report, to be published later this month, pay increases for main board directors in FTSE 100 organisations in 2011 were at a median 4% and in FTSE 250 organisations were at a median 3%.

Figures from XpertHR show that the median basic pay increase for all employees in the three months to the end of July 2011 was 2%.

The Deloitte report also found that the maximum annual bonus opportunity for FTSE 100 or FTSE 250 executive directors has remained constant at 150% and 100% of salary, respectively.

Deloitte says that there is still more work to be done by many to achieve best practice and ensure that reward is linked to performance.

Stephen Cahill, partner in the remuneration team at Deloitte, commented: “While there have been positive changes, such as the trend towards more deferral and retention of shares and the increase in clawback provisions, we are also seeing above-target annual bonuses payouts on a regular basis.”

He adds that HR directors who sit on remuneration committees need to make sure that they keep on top of the pressures surrounding executive remuneration.

“Remuneration committees need to remain vigilant and ensure that remuneration is fair and reasonable from a participant’s and shareholder’s perspective. Reward should be linked effectively to the long-term strategy and success of the company,” added Cahill.

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