UK SMEs’ directors feel the pinch, inequality gap widens

LONDON | The average 2011 annual pay for directors of small companies, with a turnover of less than £5mn a year, has fallen by £5,000 from the levels of five years ago (£87,500 in 2007). In the last 12 months alone, their average pay has fallen by 15% or over £14,000 taking their total pay package to £82,500 (in 2010 it was £96,568).

Directors of larger organisations, with a turnover of between GBP50M and GBP500M, score marginally better with an increase of 2% over the last 12 months in average annual salaries to GBP174,287. By comparison, directors of small and medium sized firms in the UK are worse off, and in some cases poorer than they were five years ago.

The increasingly weak financial position of directors of SMEs, and the difference compared with the much-hyped FTSE 100 sector, is revealed in a new survey of more than 3,200 jobs in over 400 organisations. The research, Directors’ Rewards, has been carried out by Croner, part of the global information group Wolters Kluwer.

Heads of medium-sized organisations, with a turnover of between £5mn and £50mn, fared best last year although with a still modest 3% increase, taking their package to £128,699.

Vivienne Copeland, Head of Reward at Croner, says:

“Despite recent reports that FTSE 100 bosses have seen a 49% increase in their pay, our research clearly reveals this is not the case for the majority of directors in British boardrooms.

“The average pay of all FTSE 350 directors rose by 108% between 2000 and 2010. The financial position of people running small businesses is therefore a far cry from their much larger corporate counterparts.”

The Croner survey has found that 27% of executive directors have had a pay freeze in 2011, with a further 7% taking a pay cut. The largest impact has been on bosses of small companies: two and a half times as many as those in large companies (61%) have seen their pay frozen.

The Croner survey has also found that the average pay for a managing director in a large company is almost twice that of their counterpart in a small company. Inequality gaps appear on the North-South divide of the country, too: executive directors in the South East can earn around 7% more than their counterparts in the West Midlands (£80,000 compared with £75,030).

* The total data analysed in the survey was 3,248 jobs from around 416 organisations. The data was collected in July and August 2011.

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