Company director bonuses have dipped by an average of 23% over the past 12 months, according to a new study by the Chartered Management Institute (CMI) in partnership with XpertHR. The findings defy the message of many recent press headlines claiming that bosses regularly net bonanza rewards.
CMI’s National Management Salary Survey 2014 shows that the perception of all executives earning at least six-figure bonuses is far from the truth – and suggested that companies look at more ways to financially reward high-achieving staff. Based on data from more than 68,000 executives, the bonus figure reported for 2013 to 2014 (£49,767) is the lowest for several years, with directors’ bonuses running at an average of £68,043 for the previous decade. Furthermore, fewer directors are receiving bonuses compared to the pre-recession era, with just 53% of those surveyed earning rewards this year. That’s compared to 85% between 2006 and 2008.
Overall executive pay rose by just 2.5% over the past 12 months – significantly less than the growth recorded for 2011 to 2013 (up to 3.9%), and even falling behind retail-price inflation. The average salary across executive levels now stands at £42,230, compared to £42,710 12 months ago. Directors typically receive around 18 weeks’ extra pay as their annual bonus, accounting for about 34.5% of their average salary.
CMI chief executive Ann Francke stressed: “The astronomical pay packages that have been making recent headlines are the preserve of a lucky few. For most directors, this year has seen payouts reduced, putting the brakes on the gap between top bosses and managers at other levels of our businesses. Many employees will hope that this marks the start of a new approach to bonuses, and a move to share the benefits of growth more widely as the economy picks up.”
Away from the directors’ bracket, managers’ pay has also become generally sluggish, with basic salaries increasing 27% this year to an average of £38,081: the smallest increase since 2011. However, bonuses still remain a substantial part of a manager’s pay packet, with the average reward representing 14.5% of salary, or seven-and-a-half weeks’ work per year. The uncertainty that has loomed over employment since the recession has lead to more managers staying in their current roles, for longer periods of time. According to the findings, labour turnover among managers for the past 12 months has been at a record low – standing at just 4.8% compared to 20% two years ago. This condition has been dubbed “jobtimism”.
Francke explained: “Managers have been squeezed through the recession with cuts to their teams and increases to their workloads. We saw a few years ago that many left for pastures new, opting to walk away from their roles as they had little to lose. This data shows more managers are sticking put, and with the economy on the up it isn’t surprising that many are ‘jobtimistic’ about their prospects and looking to reap the benefits of loyalty to their employer. Having survived tough times, many will be keen to see the rewards of better times.”
As such, Francke argued, “employers need to look at repaying that loyalty. Cash remains tight for plenty of organisations – but it’s not just about pay; it means providing new challenges, training and opportunities to develop new skills. The economic outlook is better than it’s been in years, but every business needs the best from its managers and leaders to help drive strong and sustainable growth.”
With fewer managers making job-to-job moves in the current market, the research also shows that – for the third year in a row – the majority of businesses have problems with finding the right staff: some 77% of companies experiencing recruitment problems.
More than half (53%) of employers identified a lack of managers with the right skills as their biggest issue, with lengthy recruitment processes deemed the biggest problem by 11.2% of bosses. Almost one in ten companies also struggle to handle the cost of recruitment exercises.
In the view of XpertHR content director Mark Crail, the survey confirms that media stories of lavish director salaries are far from reality. “Clearly, senior managers are not on the bread line,” he said. “But the figures show that the great majority of executives, and even directors, are not enjoying vast, runaway bonuses either. We know the figures here present a realistic picture of what is really happening because the data is derived, on an anonymous basis, from employer payroll and HR systems and is used by employers to manage their pay budgets – so it has to be accurate.”