Did you know that the average pay for UK CEOs is £41.2 million?
- TBA
- Nov 20, 2024
- 4 min read
Updated: Mar 17
Recently, the High Pay Centre in the UK released a corporate pay report, and the figures are jaw-dropping!
According to the report, the average salary for CEOs of FTSE 100 companies last year reached a record high of £4.2 million. To put this into perspective, this means the income of a FTSE 100 CEO is 120 times higher than that of the average worker.
1.How much are CEOs paid?
In 2022, the average salary for FTSE 100 CEOs was £4.1 million, meaning there was an increase of £100,000 in just one year.
The High Pay Centre noted that this growth was mainly driven by particularly generous pay agreements at a small number of publicly listed companies. Reportedly, eight companies last year offered salaries exceeding £10 million, while only four companies did so in 2022.
The report also highlighted the gender disparity in CEO salaries within FTSE 100 companies. Female CEOs earned significantly less, with an average salary of £2.69 million, compared to £4.19 million for male CEOs. This gap is primarily due to the smaller number of female CEOs – in the 2022-2023 financial year, only six companies had female CEOs.
At the top of the pay list is Pascal Soriot, CEO of AstraZeneca, who is 65 years old. Can you guess how much he earned? Last year, Soriot’s salary was £16.85 million.
In second place is Erik Engstrom, CEO of analytics company Relx, aged 61, with a salary of £13.64 million.
Reportedly, companies such as Rolls-Royce, BAE Systems, GSK, HSBC, Pearson, and Diageo also paid their CEOs eight-figure salaries last year.
For these executives, there could be even more good news – the UK government has made no commitments to limit executive compensation packages or introduce a ‘wealth tax’ on the super-rich, meaning most of their money stays in their pockets!
You might be wondering, why are UK executives paid so much?
The FTSE 100 index refers to the 100 companies listed on the London Stock Exchange, mostly UK companies but also including firms from other European countries.
In comparison to American executives, the pay of these CEOs is actually quite modest!
In 2020, the average salary for UK executives was only one-fifth of that for US executives. For instance, Sundar Pichai, CEO of Google’s parent company Alphabet, earned $226 million (£177 million) last year, and Nikesh Arora, CEO of Palo Alto Networks, earned $151 million. Astonishing, right?
2.How are executive and employee salaries determined?
Salaries are usually determined by balancing various factors. For company executives, their pay structure can be quite complex, with base salary being just one part of the package.
Executives also receive significant bonuses, often a mix of cash and stock options, which include annual bonuses based on internal targets and long-term incentives tied to performance over time.
Executives also receive pensions (or cash equivalents in lieu of pensions) and other perks such as company cars, drivers, health insurance, and life insurance. If a new executive has to forfeit substantial stock or bonuses from a previous job, they may negotiate additional compensation, on top of other incentives.
All these pay details are set by the company’s remuneration committee, made up of board members, and the committee typically hires compensation consultants to devise pay formulas. The details are published in the company’s annual report, and executive pay packages are subject to shareholder votes every three years. Shareholders can also vote annually to express their dissatisfaction with the current pay package, though these votes are advisory, meaning the company isn’t obligated to make changes.
If you’re planning to start a company in the UK, you need to think not only about how much to pay your executives but also about employee salaries. Offering high pay can attract and retain talent, showing you value your employees and boosting their self-worth. However, as a business owner, you don’t want to overspend on salaries.
So, what’s the right number? You’ll need to weigh factors such as:
What future employees want
The market value of employees
Their value to your business
What you can afford
3.Tips for employers
Be clear about the role
Understand your business structure and know what type of employee you need and for which position. Make sure the job title accurately reflects the role and responsibilities and define the percentage of time spent on each task.
Research the Market and Gather Salary Data
Look into what other companies are paying for similar roles. Keep in mind that salary data can change quickly, particularly for in-demand skills, so stay updated.
Talk to local employers
While online research is a good start, it’s also useful to talk to other business owners and recruitment firms to get a sense of appropriate salary ranges.
Follow local laws
Be aware of legal requirements regarding wages, including minimum wage, pay dates, frequency, and record-keeping obligations.
Understand candidate expectations
When interviewing candidates, don’t forget that they may have their own salary expectations. You can ask about their current pay structure and additional benefits.
Calculate what you can afford
After gathering market data, it’s time to assess your business budget. Consider how much a new employee can generate in revenue within the first year and how their salary fits into your company’s structure.
Lastly, don’t forget to consider taxes!
For instance, if you’re paying yourself as a company director, research whether it’s more tax-efficient to receive a salary or dividends. If you’re paying employees, remember to apply for business expenses to lower your company’s tax bill.
For any tax-related questions, feel free to contact TB Accountants for expert advice!
