Research conducted by the Chartered Institute of Personnel and Development (CIPD) has found that there is a “crisis” facing the UK’s largest companies regarding the discrepancy between the salaries of chief executives and the rest of the workforce. The pay gap has caused motivation levels among workers to plummet, with the survey showing that six in ten workers felt demotivated by this difference in pay, and more than 1,000 of those surveyed agreeing that high salary levels are bad for the reputation of companies.
The High Pay Centre provides research-based evidence for the sheer magnitude of this widening pay gap, concluding in a 2015 report that chief executives earn 183 times more than workers.
Speaking on behalf of the CIPD, their reward advisor Charles Cotton said: “The growing disparity between pay at the high and lower ends of the pay scale for today’s workforce is leading to a real sense of unfairness, which is impacting on employees’ motivation at work.
“The message from employees to chief executives is clear – ‘the more you take, the less we’ll give’.
“At a time when the average employee has seen their salary increase by just a few percentage points over the last several years, we need to take a serious look at the issue of top executive reward.”
These findings have led to stronger calls for action so that the pay gap between the wealthy and middle to low income workers is reduced. While top chiefs were estimated to be earning an average of £4.964m in 2014, up from £4.129 million in 2010, the regular UK worker is earning £27,195.
The topic is one that centres around two issues. Firstly, if employees feel demotivated by executive salaries, we must see not only an increase in the salaries of regular workers and a reasonable decrease in the salaries of chiefs, but also a general shift in the culture and ideas fostered by top UK companies. If employees are feeling undervalued, it is highly likely that they are being undervalued. An increase in salary alone will not fix this. If companies encourage meritocracy, rewards and promotion, workers will feel that they too have potential access to executive roles.
Secondly, discontentment at executive salary levels stems also from the feeling that chiefs fail to understand the everyday realities and demands of lower-level roles, and that executives are not particularly deserving of their salaries. The CIPD report found that there is currently little evidence on the methods used to select individuals for these top roles. Further information on this matter would lead to greater executive accountability which would, in turn, result in a reduced pay gap.