“Shock to the system” as managers see real terms pay drop and directors’ bonuses slashed
- Annual pay rises for senior managers grind to halt after five years
- Bonuses for directors fall by an average 16% from £53,504 to £44,987
- Managers now work an average 44 days unpaid each year
- Work/life balance for managers must improve to avoid sleepwalking into new productivity crisis, warns CMI
New data from the Chartered Management Institute (CMI), the professional body for management and leadership, and XpertHR, the employment intelligence service, show basic salaries and bonuses for directors and senior managers have fallen in real terms, with inflation overtaking pay increases for the first time in five years.
This comes after separate CMI research* found managers worked an extra 44 days a year last year over and above their contracted hours - up from 40 days extra in 2015. The same research found 59% of managers are ‘always on’, frequently checking their emails outside of work and one in 10 had been forced to take sick leave because of stress.
The release of the data follows the government’s unveiling of new rules requiring large businesses to publish the pay ratio between the earnings of the chief executive and the average worker.
This is a shock to the system for British business at a time when we need to attract 2m more managers into the workplace.
The UK is at risk of sleepwalking into a new productivity crisis because too many managers are chronically overworked and stressed by an ‘always on’ culture.
All tiers of management, from entry level professionals to top executives, suffered a slowdown in 2017. Basic salaries increased by just 2.4% to £34,526 – which is below the Consumer Price Index (CPI) rate of 3% for the corresponding period. This represents a salary cut of 0.6%.
In addition, directors have seen average bonuses slashed since last year by 16%, from an average of £53,504 to £44,987.
Over the past five years, senior managers and directors have averaged 3.9% annual pay increases – equating to 2.3% in real terms. Now CMI/XpertHR data from 128,582 managers and professionals indicates those above-inflation increases have come to an end.
This is today's problem and cannot just be swept under the rug. Britain needs 2m more managers by 2024 on top of the existing 3.6m if it is to meet the demands of a post-Brexit economy, so it is imperative that businesses wake up and improve the workplace environment.
To attract the necessary talent, businesses must focus on the softer, but no less important, workplace benefits. This means improving employees' work/life balance, protecting wellness, giving them training and development opportunities, and fostering a sense of purpose and meaning in their jobs.
Those are actually far more powerful drivers of employee engagement than money, so this is a great opportunity for employers to reset their thinking about how to attract, motivate and retain their senior talent.
There has been a sharp divide in the rewards on offer to senior managers and almost everyone else over recent years. Where those at the top have forged ahead, the rest have seen their pay eroded by below-inflation 'increases'. The picture now appears to be slowly changing - and, on the whole, pay awards are now at or above the level of inflation. But there is a long way to go to restore any sense of balance in how rewards are shared around in many companies and the accumulated difference remains wide, raising serious questions of fairness and equity.
The government’s push for transparency reporting the gap between the highest-earning and average workers in large businesses reflect prevailing opinion among managers on the need for reform.
Sustainable reform of executive pay requires a coalition of the willing to be successful: government, business, investors and professional associations must all work together. Shining a light on the pay ratio will force top bosses to take steps towards repairing business culture and identify what really creates value for businesses.
The government’s timely reporting plans reflect the changing mood in business. CMI research reveals that 74% of all managers and two-thirds of directors of partners support curbing disproportionate executive pay, which shows that even senior managers understand that business now needs to fix the pay system to make it fairer for all.
The Managers and Professionals Salary Survey also found that 90% of employers experienced problems with recruitment over the last 12 months. The most common reason was difficulties in finding key skills, experienced by three-quarters (76%).
While down on the last two years (when it was 86% and 87%) this remains high compared to just a few years ago, having soared from 49% in 2011. Three in 10 employers this year said that reward packages are too low to recruit high-quality applicants.
For more information visit: www.managers.org.uk/salarysurvey @cmi_managers
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*CMI Future Forecast, December 2017
**CMI Future Forecast/Quality of Working Life, January 2018
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Notes to editors
The latest edition of the XpertHR Managers and Professionals salary survey covers 128,852 employees from 368 organisations. For each employee we collect XpertHR job level, XpertHR job function, industry, region and full-time equivalent reward data. This information is then validated and aggregated for reporting purposes. Strict data handling methods and reporting thresholds are used to ensure that published results do not disclose any personal information.
To produce nominal-terms pay movement figures XpertHR creates a matched sample of all incumbent employees who were present in two adjacent editions of the salary survey, discards those who have changed job level or job function to remove job change effects such as promotions, calculates the year-on-year change in pay for each individual, and then takes the mean average to arrive at a final pay movement figure. The real-terms pay movement figure is the nominal pay movement figure less CPI for the corresponding time period.
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