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Economic Justice

High Pay Day 2020: Scope for fairer pay and lower inequality remains considerable

Pay for the typical FTSE 100 CEO in 2020 has already surpassed the amount the average UK worker earns in an entire year. High Pay Centre argues that much more can be done to achieve a better balance between those at the top and everybody else, in this blog originally posted on High Pay Centre website on 5 January.

FTSE 100 CEOs only need to work until just before 17.00 on Monday 6 January 2020 in order to make the same amount of money that the typical full-time employee will in the entire year.

The calculation for ‘High Pay Day 2020’ is based on research by HPC and the CIPD, the professional body for HR and people development, showing that:

  • Top bosses earn 117 times the annual pay of the average worker
  • In 2018 (latest available data) the average FTSE 100 CEO earned £3.46 million, equivalent to £901.30 an hour
  • In comparison, the average (as defined by the median) full-time worker took home an annual salary of £29,559 in 2018, equivalent to £14.37 an hour
  • To match average worker pay in 2020, FTSE 100 CEOs starting work on Thursday 2 January 2020 only need to work until just before 17.00 on Monday 6 January – just three working days (33 hours)

High pay will be a key issue in 2020 as this is the first year that publicly listed firms with more than 250 UK employees must disclose the ratio between CEO pay and the pay of their average worker. Under changes to the Companies Act (2006), firms must now provide their CEO pay ratio figures and a supporting narrative to explain the reasons for their executive pay ratios. The first round of reporting will be seen in annual reports published in 2020.

Compared with last year, CEOs now have to work slightly longer to make the median UK salary, after their pay fell from £3.9 million. However, the fact that it now takes them until teatime, rather than lunchtime, on the third working day of the year to pocket a sum of money that half of workers did not earn for an entire year’s work in 2019 rather puts this slight fall into perspective.

How major employers distribute pay across different levels of the organisation plays an important role in determining living standards. CEOs are paid extraordinarily highly compared to the wider workforce, reflecting an approach to business that has made the UK one of the most unequal countries in the developed world.

If we want to raise incomes for low and middle earners, measures that will enable them to get a fairer, more proportionate share of the spend on pay distributed by big companies will be of critical importance.