SENIOR EXECUTIVES PAY GROWTH GOES INTO REVERSE  

Pay growth for directors and senior executives has gone into reverse in the past year and has fallen to below the cost of living, as wage pressures start to bite following the credit crunch, reveals research by Incomes Data Services (IDS). 

According to IDS, the average pay increase for Board members and senior management was down 0.8 percentage points in the quarter to the end of July (the latest period for which data are available) to 3.9%, compared to 4.7% in the same period the previous year[1][1]. The average midpoint salary for Board members is now £177, 862. For senior managers it is £96,496. 

Pay awards for all managerial levels are now running at an average of 3.8% in the period, compared to 4.2% last year, putting them well below the Consumer Price Index inflation measure of 4.4%.  By contrast, there was no change in the median pay award for non-management staff, which held steady at 3.5%. 

Steve Tatton, editor of the IDS Executive Compensation Review, said: “Having enjoyed proportionately far more generous pay awards in recent years than their colleagues at lower levels, top tier management are now starting to share some of the pain felt by their more junior colleagues with pay rises that are not even keeping pace with inflation.” 

“Fears that high inflation will push up wage costs appear, for now, to be unfounded. It will be interesting to see how this trend develops if, as anticipated, the economic downturn takes hold in earnest.” 

IDS’s research also found that senior executives’ pay increases in the finance sector are now lagging behind salary awards for the manufacturing and services sectors. Manufacturing saw the highest average award at 3.9%, compared to just 3.7 % in finance. By contrast, last year manufacturing management pay awards averaged 3.8%, compared to finance at 4.9%. 

Tatton concluded: “Even given the recent turmoil in financial markets, it’s quite surprising to see the finance sector exercising such pay restraint for its top brass. In contrast we are seeing manufacturers’ relative optimism about their prospects up until now reflected in their proportionately higher pay awards for their most senior executives.”

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