Should bosses get big pay rises?

NHS bosses received a near 7% pay rise in 2008-09, more than twice as much as nurses, a survey has found. Tara Craig asked industry figures whether bosses should ever receive twice as big a pay rise as their staff – and if so, how the company should go about justifying it.

The HR director: Graham White, Westminster City Council

Bosses should absolutely not receive double the pay rise of their staff – every job has a value, and this should determine salary progression. I am not suggesting we recreate Animal Farm, but the widening crevasse between the lowest and the highest salaries is now indecent. Furthermore, it is time to be much smarter about pay bill modelling. The tradition of across-the-board percentage rises has done nothing but broaden the ever widening gap between the lowest and highest paid.

While income tax levels equalise different salary levels to some extent, most other elements of inflation and the cost of living hit everyone equally. It therefore makes no sense to unilaterally push through unrealistic pay rises. But the problem is now endemic. We are creating a generation of mercenaries who are using their current salaries as crowbars to lever still more from current or future employers resulting in the salary for jobs exceeding the value of the role and its contribution.

Everyone from police chiefs to bankers are now admitting they cannot justify the level of salary they receive. It is time to look at our jobs and calculate their value to the organisation, and this should determine the salary. We need to stop setting salaries based on ego or greed. We should not allow jobs to be valued by how much it might take to attract a particular candidate – a salary should be calculated on the real contribution the role makes to the organisation and its objectives.

The business psychologist: Stuart Duff, Pearn Kandola

We make lots of comparisons in life. We compare houses, cars, our children’s schools – and pay. But we don’t make random comparisons. We don’t think to ourselves: “This house I’m living in is nice, but it’s not as nice as Windsor castle.” And in the same way, we don’t tend to compare our salary with that of senior bosses. From a psychological perspective, research into reward tells us that we compare ourselves to the ‘average’ person within our social sphere. Otherwise, comparisons are meaningless. Many hard-working people will of course feel some short-term frustration and disappointment at the differences, but will quickly return their focus to what is important to them – keeping their job, earning enough to pay the bills.

So should bosses receive big pay rises? Yes – if they’re clearly linked to skill, effort and performance. Is it necessary to justify the difference? No it’s not – in the same way that it isn’t necessary to point out the degree of pressure, complexity and risk involved every time a director or chief executive has to make a decision that will affect the livelihood or wellbeing of many other people.

The employment expert: Ruth Spellman, Chartered Management Institute

With the UK only just emerging from the worst recession in 60 years, it is not surprising there was widespread anger in response to revelations that NHS chief executives have received a 7% pay rise.

The health service has argued the complexity of the senior level roles warrants high rewards, with one London hospital saying it was willing to pay a large amount to keep hold of its high-calibre chief executive.

The NHS is under the misapprehension that it is necessary to pay top whack for top talent. It isn’t. At senior levels, high salaries are only part of what’s needed to retain talented executives. The challenges of the role, combined with the opportunity to shape the direction of the organisation, is highly valued by top-level staff. Chief executives want to feel that, above all, they are making a difference, and organisations need to focus on ways to enable them to.

Earnings should be related to performance and levels of responsibility but they shouldn’t be excessive, or have the potential to damage the morale of those staff at lower levels. It is universally accepted that the more senior you are, the more you will be paid. The situation becomes untenable for staff when the rise rate of senior-level pay is above inflation, while they get a raw deal.

Comments are closed.