Proposal to introduce ‘maximum wage’ in the UK

New data from the think tank the High Pay Centre shows that UK CEOs are paid significantly more than their average workers and that there is growing support for the introduction of a maximum wage.

The data, which is based on pay ratio disclosures in the FTSE 350, shows that CEO to worker pay gaps remained stable from 2019-2024, with a brief narrowing of the gap during the Covid-19 pandemic.

The median ratio of the CEO pay to that of the median full-time UK employee was 52:1 across FTSE 35O companies in 2023/24, down from 54:1 in 2022/23.

The median pay ratio of FTSE 350 CEOs to lower-earning colleagues at the 25th percentile (or lower quartile threshold) of the UK employee population was 71:1 in 2023/24, down from 75:1 in 2022/23.

These ratios are higher for the FTSE 100, where the median CEO/median employee ratio was 78:1, and the median CEO/lower quartile employee ratio was 106:1 (80:1 and 119:1 in 2022/23).

18% of FTSE 350 companies had a CEO to median employee ratio of over 100:1, while at 5% it was over 200:1. The pay ratio between the CEO and the 25th percentile was over 100:1 at 28% of companies and over 200:1 at 9%.

The introduction of a maximum wage

Over the past five years, pay ratio disclosures have given workers, investors and other stakeholders a much better insight into how companies distribute pay, one of their biggest items of expenditure, the High Pay Centre said.

It added that there has been a lot of interest in the role that wealth taxes on those at the top and other forms of redistribution could play in reducing the UK’s very high levels of income inequality, but it’s also important to stop these inequalities from emerging in the first place.

“Our research suggests that a maximum CEO to worker pay ratio could help ensure that all workers get a fair reward for their contribution to business success. It is time for policymakers to consider the idea seriously,” it said.

To do so, the think tank says that policymakers will need to consider the following questions:

At what level should a maximum ratio be set? Public opinion research suggests a multiple between 10 and 20 would enjoy
public legitimacy.

Who should be the relevant comparator for CEO pay? Options could include median or low-earning colleagues within the same
organisation, or workers across the wider economy.
Could we incentivise, rather than mandate a maximum ratio? Companies in San Francisco and Portland in the US are not
subject to a cap but are required to pay an additional corporation tax surcharge if their pay ratios exceed certain levels.
What timeframe might be realistic for implementation? Major cuts to top pay resulting from the immediate introduction of a cap
would undoubtedly disappoint current and near-term business leaders, but a gradual transition to more equal pay structures.