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Are top contractor accountants getting salary increases above rate of inflation?

Are top contractor accountants getting salary increases above rate of inflation?

The issue of executive pay and bonuses could be back in the spotlight following a report from Deloitte which shows that many executive directors are receiving above average salary increases.

The Executive Directors’ Remuneration report shows that main directors on the board of FTSE 100 companies received salary increases of between 2.5% and 7.5% this year. The average was 4%. In FTSE 250 companies, the increases ranged between 0.5% and 5%, with a 3% average.

Stephen Cahill, a partner of the Deloitte remuneration team, said he was surprised to see that a number of salary increases were more than 5%; significantly above the rate of inflation and the average increase in employees’ wages. Remuneration committees should only consider increasing executive’s salaries if there is a compelling reason to do so and the increases should be in line with those awarded to other employees.

There has also been a substantial increase in bonus payments this year. In FTSE 100 companies, bonuses ranged from 71% of the maximum to 87%, whilst in FTSE 250 firms the range was from 54% to 86%.

Cahill said that some hard thinking needs to be employed over annual bonus plans and targets and expectations should be recalibrated so that bonuses are not as good as guaranteed.

However, on a positive note, the survey did find that more than 66% of FTSE 100 organisations and 50% of companies in the FTSE 250 are now deferring at least part of the bonus. Furthermore, about 50% of companies have introduced clawback provisions.

Executive salary increases should be the same as general employees and if they are above the market median at present, remuneration committees should think about freezing them to show restraint while the UK is still going through a period of economic difficulty, Cahill added.

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Image: Dry Line by nic_r

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