‘Post-pandemic rethink needed on pay’

● Fund wage rise for lowest-paid with cut to highest-paid, think-tank suggests

Millions of low-paid workers could be given a post-pandemic wage rise if leading employers “rethink” earnings, according to a new report.

The High Pay Centre thinktank said a £2,000 annual increase for many of the lowest-paid workers could be funded by a 3 per cent cut to the highest-paid employees.

It said its research showed a huge difference in the pay of chief executives and other employees in FTSE 100 companies receiving financial support from the government.

The study was based on new pay ratio disclosures in companies’ annual reports, which require them to include their chief executive’s pay relative to the top quarter, median and lower quarter pay of their UK employees.

The High Pay Centre said it calculated that reducing the pay of employees at the upper quartile by 3 per cent could fund a median pay rise of £2,000 for the lowest-earning quartile of employees in the same companies.

The need for changes to pay is highlighted by figures showing the “vast” pay gaps between high and low earners at FTSE 350 companies, said the report.

Luke Hildyard, executive director of the High Pay Centre, said there was an increasingrecognitionanapproachto pay was needed that rewards people more fairly.

He said: “The new disclosures make it harder for big companies to argue that pay rises for their lowest-paid workers are unaffordable, given the potential to fund increases through slight rebalancing of pay awards from the highest earners to the lowest.

“We hope that companies can improve transparency further by including outsourced workers in their pay ratio calculations and providing more detailed information on top earners beyond their chief executive officer. A better understanding of pay inequality can help inform the debate about the kind of society we want to be as we ‘build back better’ post-covid-19.”

Mubin Haq, chief executive of Standard Life Foundation, which funded the study, said: “The pay ratios data highlights the very wide variance amongst companies as to how they reward their employees. This ranges from the CEO of a FTSE 350 company earning 543 times what an employee at the lower quartile of their company earns, to just eight times.

“The pandemic has highlighted that there are many workers who have been undervalued to date but who are essential and key to keeping our country running. Small changes to pay and benefits at the top could result in some very tangible gains for those struggling to make ends meet.”

A new study suggests the government’s furlough scheme has been effective in helping workers in lower income areas of the UK.

Business advisers Moore said employees in areas of the country with the highest use of the furlough scheme receive an average weekly wage of £576, against £717 for areas receiving the least support.

Areas with the highest number of workers on furlough include Glasgow East and parts of London.