Croner research: Significant pay gap between directors at small and large organisations

Directors of small organisations have seen a drop in their pay, while those in large organisations have seen an increase, according to research by Croner.

The Directors’ rewards research found that the average 2011 annual pay for directors of small firms, with a turnover of less than £5 million a year, has fallen by £5,000 from the levels of five years ago, of £87,500 in 2007.

In the last 12 months, average pay of these directors 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 £50 million and £500 million, scored marginally better with an increase of 2% over the last 12 months in average annual salaries to £174,287.

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

The survey found that the average pay for a managing director in a large organisation is almost twice that of their counterpart in a small company.

Executive directors in the South East can earn around 7% more than their counterparts in the West Midlands – £80,000 compared with £75,030.

A managing director in a manufacturing company earns an average salary of £105,327 compared with their counterpart in the voluntary sector on £76,858.

The survey also 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 organisations: two and a half times as many as those in large companies (61%) have seen their pay frozen.

Vivienne Copeland, head of reward at Croner, said: “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.

“If you take into account the fact that over a quarter of directors have had a pay freeze, work longer hours, taken fewer holidays and seen their retirement age rise, many directors are facing the same kinds of setbacks in terms of reward as the bulk of the UK workforce.”