Executive bonuses return as base salaries fall

Bonuses for UK executives rose significantly over the last year while salaries fell in real terms by almost 2%, according to new research from the Hay Group.

The report, Top executive compensation in Europe, revealed that bonuses have risen by 17% since 2009, with the median executive bonus paid standing at £714,000.

UK main board executives saw a marginal increase of 0.9% in salaries, to a median of £630,000 per annum. However the inflation rate of 2.8% undermined this rise, resulting in a fall in real terms of 1.9%.

This drop is among the biggest in Europe, with only Norway faring worse than the UK with a fall of 2.7%.

However, total cash remuneration, a combination of base salary and annual bonuses, rose by 14% overall, jointly the fourth highest increase of the countries studied.

Simon Garrett, director of executive reward at Hay Group, said: “We believe that, now more than ever, remuneration committees need a clear understanding of the interaction between reward and corporate strategy, and the value gained from compensation paid to top executives.

“Without this, a sustainable long-term approach to executive compensation cannot succeed.

“Boards now have no choice but to treat executive pay as a strategic tool if they want to excel in an increasingly competitive market.”

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