Workers get bigger pay rises than their bosses

The heads of Britain's biggest firms gave their staff bigger pay rises last year than they received themselves – for the first time in a decade.

Britain's 100 largest companies gave their staff an average pay rise of 2.5 per cent in 2009, research to be published by the accountant PricewaterhouseCoopers (PWC) will show today, while the executives that ran the businesses got increases in pay and bonuses of only 1 per cent.

The turnaround – the last time staff saw bigger pay increases than their bosses was in 2000 – may go some way towards mollifying the increasingly large number of critics of companies' executive pay policies.

A string of revolts by shareholders at companies including Marks & Spencer, Shell and Cable & Wireless – as well as the furore over the pay and bonuses awarded to top bankers – has seen many companies review their policies on compensation for senior staff.

Tom Gosling, reward partner at PWC, said that restraint on executive pay was likely to continue.

"Remuneration committees must balance the need to motivate executives in the face of a challenging business environment, reduced bonuses and increased taxation against shareholders' perceptions that the link between pay and performance is not strong enough," he said.

"With the next AGM season taking place during, or in the run-up, to an election, against a backdrop of continued economic uncertainty, scrutiny on executive pay arrangements will not diminish this year," he added.

One in six bosses at the UK's largest 350 companies got no bonus at all last year, PWC said, while the average pay-out was 20 per cent lower than in 2008. However, these reductions seem not to have been sufficient to satisfy many investors. A fifth of FTSE 100 companies saw at least 20 per cent of their shareholders withhold support from their remuneration report, up from 3 per cent in 2008.