Pay Gap is widening and taking its toll on employees
A recent article in Canadian HR Reporter called attention to new research from UK- based Chartered Institute of Personnel and Development that suggests organizations may be reaching a tipping point where gaps between employee pay and executive pay may be undermining organizational performance.
In Canada, the gap between CEO pay ratios is often significantly higher. For example, the latest research from the Canadian Centre for Policy Alternatives (CCPA) on the pay of Canadian CEOs found that in 2014, CEOs made 184 times more than the average worker. The average pay of the country’s 100 top-paid CEOs was $8.96 million in 2014, compared to the average wage for a full-time worker of $48,636. *
That there is an inverse relationship between exorbitant CEO salaries and employee motivation comes as no surprise. As an employment law lawyer whose clientele is primarily employee-based, I speak from experience when I state that this is only one of the indices that cause workforce cynicism and alienation. These, in turn, translate into low productivity, absenteeism and poor health. Each negatively affects the bottom line.
Higher salaries based on merit or a reasonable cap
CEO’s are arguably entitled to a higher salary than their foot soldiers for a variety of reasons but, at some point, there is a diminishing return when the disparity is grossly disproportionate to the salary of the average worker. I believe that the workforce would be ready to accept a reasonable cap with additional compensation in the form of increases or bonuses tied into positive results. Higher salaries based upon merit would be more palatable, especially if it trickles down to those on the lower rungs of the corporate ladder. As the saying goes: “A rising tide lifts all ships.”
The materials provided on this site are for information purposes only. These materials constitute general information relating to areas of employment law familiar to employment lawyer, Shelley Brian Brown. They do NOT constitute legal advice or other professional advice and you may not rely on the contents of this website or blog as such.
* Source: Pay gap between CEOs and workers taking its toll | Canadian HR Reporter http://www.hrreporter.com/blog/compensation-rewards/archive/2016/02/02/pay-gap-between-ceos-and-workers-taking-its-toll via @hrreporter