Research Reveals Significant Earnings Gap Between Directors of Smaller Companies and Large Organisations

By Andrew Willis
29 Nov 2011

  • Directors of SMEs no better - and in some cases worse off - than they were in 2007

  • 61% directors in smaller companies had a pay freeze last year

London, 12 December 2011 –Directors of small and medium sized firms in the UK are no better off - and in some cases poorer - than they were five years ago. The surprising financial position of directors of SMEs – and the difference compared with the much-hyped FTSE100 sector - is revealed ina new survey of more than 3,200 jobs in over 400 organisations.

The research, Directors' Rewards, has been carried out by Croner. The average 2011 annual pay for directors of small companies, with a turnover of less than £5M a year, has fallen by £5,000 from the levels of five years ago (£87,500 in 2007). In the last 12 monthsalone, 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 £50M and £500M, score marginally better with an increase of 2% over the last 12 monthsin average annual salaries to £174,287.

Heads of medium-sized organisations, with a turnover of between £5M and £50M, fared best last year, although with a still modest 3% increase, taking their package to £128,699. VivienneCopeland, Head of Reward at Croner, says: "Despite recent reports that FTSE100 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:

  • The average pay for a managing director in a large company 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.
  • 36% of directors are working over 50 hours a week, with 26% of them working over 55 hours. 41% of directors are entitled to 30 days holiday a year but only 11% take 30 days.

VivienneCopeland adds: " 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."

Notes to editors 265 directors responded to a special Croner survey on specific director remuneration issues. In addition, the data for this year's Directors Rewards has been extracted from the database of participants in 60 other surveys run each year by Croner. The total data analysed in the survey was 3,248 jobs from around 416 organisations. The data was collected in July and August 2011 and the survey published in November 2011.

About the Author

Andrew Willis

Andrew Willis is the senior manager of the Litigation and Employment Department and assumes additional responsibility for managing Croner’s office based telephone HR advisory teams, who specialise in employment law, HR and commercial legal advice for small & large organisations across the United Kingdom.





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