Large pay gaps cause strikes and employee sickness

Organisations with big pay gaps between the highest and lowest-paid staff suffer more industrial action, more work-related sickness and higher staff turnover, according to research by the High Pay Centre.

The high cost of high pay: an analysis of pay inequality within firms report, which surveyed 1,923 organisations, found that organisations with executives earning 12 times more than the lowest-paid employee experience strike action more than once a year.

Employee wellbeing also suffers because of pay disparity. Top earners that receive eight times the pay of junior employees report at least one case a year of work-related illness and stress. In comparison, organisations with pay differentials of five or less do not report any.

The research also found:

  • Executive pay has increased by 450% over the past 12 years, compared to a 16% rise for employees on average levels of pay.
  • In workplaces that reported no industrial action, top earners received a weekly salary of £2,340, compared with an average gross weekly wage of £450.
  • In workplaces where industrial action was reported, a top earner receives £5,400, compared to the £450 average gross weekly wage.

Deborah Hargreaves, director at the High Pay Centre, said: “High executive pay is not only frequently unmerited but has a huge hidden impact on the rest of the organisation and society as a whole.

“Whether it’s through staff turnover, sickness, low morale or industrial action, big pay gaps undermine employees’ loyalty to the organisation and their managers.

“Employers suffer lost productivity, have to pay more sick pay and legal and recruitment costs as staff left feeling the financial and emotional strain are driven even further into the ground.”