Difference of pay ratio between top executives to that of the lowest in the ladder is widening by the day. Recent surveys by various bodies have repeatedly proved that this could play huge strokes in people’s life in the years to come. While much has been said about it, very few actions have been taken to rectify the same. This is largely because of the good relation that the corporate segment of Britain shares with the Government.
About One Society
Set up in 2009, One Society is a group which is creating awareness about the huge pay inequality that exists in the chain. The aim of the group is to push the payment inequality issue higher up the agenda in the political space. The group has highlighted that over the course of last 10 years, the pay inequality has multiplied many folds over. The group further stressed on the fact that if the discrepancy is not fixed in the coming 15 years, UK will have a tough job on hand in terms of tackling the issue of inflation.
How are Pay Ratios Calculated?
There are many methods of calculating the pay ratio. The simplest is to work out the difference between the highest paid employee and lowest paid one. The second method is to calculate the difference between the CEO salary to that of the midpoint of average salary clubbed together.
The third approach is to calculate the difference between the top 10 paid employees to that of the lowest 10 paid employees. While there are many approaches to calculate pay ratios, different companies follow different approaches. Most companies, however, don’t highlight the pay discrepancy ratio at all. The reason is understandable, as releasing the ratio to the public can create big embarrassment for the company.
There is no agreed ratio across companies. Different sector has varied discrepancies. This is because of the fact that different skills are required for different sectors. For instance, Tesco will have a larger pay discrepancy, since the skill sets between employees of the top to that of the bottom is very wide. Whereas, an investment bank on the other hand will have a lower pay ration since all the employees are highly skilled. One theory suggests that the pay of the CEO and 10% of the lowest paid employees should be in the ratio of 1:75.
Why is Pay Ratio a Problem in the UK?
As mentioned earlier, the lower ones in the ladder will be eligible to not pay any taxes to the Government. This is a huge threat to the economy. The other problem is that a lower salary such as these will force this class to lead a life which is devoid of basic amenities.
How can the Problem be Solved?
There are many ways through which this problem could be solved. The more simplistic approach could be to force companies to reveal pay ratio. It won’t need thousands of companies to do the same. Forcing the top ones could do the trick.
By revealing the pay ratio, the company would be embarrassed enough to make it right. A joint action by the media, people and society at large will force the big guns to change their approach toward payment ratio. Lowering a CEO’s pay by a few thousand pounds and compensating the ground level employees can drastically improve their living condition. It is very difficult to understand how one person’s pay can be hundreds of time higher than the lowest paid employee in a particular company. While making the big sharks to actually disclose their pay discrepancies is challenging, it is still worth fighting for.