Exploring how the economic crisis is affecting pay at the top and the wider workforce

The scale of the economic crisis we’re facing hit home this week, with official figures confirming hundreds of thousands of jobs have gone and that we’re in our worst-ever recession. Two of the CIPD’s recent reports – the Labour Market Outlook and FTSE 100 CEO pay in 2019 and during the pandemic – both explore how the economic fallout from the pandemic has affected pay, albeit from very different perspectives.

Wage freezes

Data from the Labour Market Outlook is the weakest it’s been for many years. It finds that 40% of employers plan to introduce wage freezes over the next year. Given the current context and in light of the report’s other findings – that one in three (33%) organisations expect to cut jobs this quarter - we actually welcome this step, as we believe it will help to protect jobs.  

We are also urging employers to look at what else they can do to ensure redundancies are only made when all other alternatives have been exhausted. So alongside freezing pay, this could include halting recruitment, reducing hours or restricting overtime, and cutting bonuses.  

The report secured extensive national media coverage, with national broadcast highlights including: Newsnight, Radio 4’s Today, Sky News, LBC and Bloomberg. It was also covered by the: Telegraph, Times, Guardian, Financial Times, Mail, Independent and BBC Online.  

Chief executive pay

In the annual report of FTSE 100 pay, which we carry out with the High Pay Centre, we looked at what happened to chief executive pay in the 2019 financial year. We found the median CEO pay package was £3.61m, which is very similar to the £3.63 recorded for 2018 and the lowest amount since 2011.  

We also assessed what’s happened to pay at the top since the pandemic took hold, and if the economic downturn has had any impact. By the start of July, we found that chief executives had taken a pay cut in 36 FTSE 100 companies. But further analysis shows these reductions do not represent a fundamental rethink of CEO reward, seeing as most of the cuts were to salaries, which make up a small part of their total pay package.  

We argue that the lack of any significant change over the last year, or indeed since the current crisis started, supports the case for RemCos to have broader responsibility for governing people and culture. Building on the amended UK Corporate Governance Code 2018, we want decisions on pay and bonuses at the top to be more fairly aligned with wider workforce pay. We also think that there are opportunities for greater consideration to be given to  sustainability metrics. This includes investment in training and improvements in company culture and diversity, as well as customer experience and the environment.     

The report was covered across national media, including the: Telegraph, Times, Guardian, Mail, Financial Times and BBC Online. We both also did interviews on the BBC World Service’s Business Briefing and Sky’s Ian King Live. The BBC’s economic correspondent, Dharshini David, also covered it for Radio 4’s Today. 

We will be doing further work on the reform of RemCos early next year and look forward to updating you on our progress.