Table three shows the ten companies with the lowest pay levels at the 25th percentile point (or lower quartile threshold) for 2023/24. These companies can be considered to have the lowest paid UK employees across the FTSE 350, (subject to caveats about indirectly-employed workers, who are not covered by the pay ratio reporting requirements).

Average pay for workers at the 25th percentile across the ten companies with the lowest lower quartile thresholds has increased by £2,094 since last year, an increase of 11.46%.  This suggests that there has been some progress toward raising pay levels for lower earning workers (at least for those classed as direct employees and therefore included in the pay ratio figures). However, the changes could also reflect changes to the employee population used to make the calculation – if the size of the workforce has been reduced or jobs outsourced or relocated this might significantly change pay at the 25th percentile of the UK employee population without workers experiencing a significant change in their pay levels. It is striking that in the cases of JD Sports and Mitchells and Butlers, for example, there is no detail in the pay ratio statement as part of their annual report explaining the dramatic increase in the recorded pay levels.

The lowest pay ratios were in the financial services sectors, with the median CEO to median employee ratio across the eleven calculations disclosed by investment banking and brokerage services firms standing at 26:1, exactly half the FTSE 350 median.

The highest ratios were in the general retail sector where 102:1 was the median of the fourteen ratios disclosed, over double the median ratio of those disclosed across the FTSE 350 as a whole.

The ratios imply significant potential to raise pay for low and middle earners by reducing expenditure on those at the very top. If the pay of the CEOs of non-living wage accredited companies in the sample was capped at 20 times the pay of their median UK employee, their aggregate pay would have reduced to £106m. The difference of £214m would hypothetically have been enough to raise the annual pay of over 78,000 full time workers earning the statutory minimum wage to the Real Living Wage (approximately 700 workers per company).

The opportunity to redistribute from the top quarter to the bottom quarter of employees is more limited because the gaps between the groups is small compared to the gap to those at the top. The median upper quartile to lower quartile ratio across the companies was 2:1, in comparison to the median CEO to upper quartile ratio of 34:1. In other words, an employee moving from the lower quarter to the top quarter of a company’s internal pay scale can expect their pay to nearly double. Going from the top quarter threshold to the very top would see it increase 34 times over.

There are very likely to be employees within the top quartile of most companies, beyond the 75th percentile, who are very highly-paid. A portion of the aggregated pay of these individuals might equate to the cost of funding significant pay increases across the wider workforce, potentially while retaining pay levels that most people would still consider very high for the top earners.

However, to make any firm conclusions on the scale of redistribution that might be possible - and the costs and value of top earners more generally - would require more information on expenditure on the pay of employees between the 75th percentile and the CEO than the pay ratio disclosures provide. 

Significant limitations to the pay ratio reporting requirements remain:

• Lack of granular detail on top pay - Better disclosure of pay for very high earners would not only provide better insights into intra-company and potentially societal inequality, but could also support the pay negotiation position of lower- and middle-earning workers and their representatives by providing them with better information on the hypothetical potential to fund pay increases through internal redistribution.

• Lack of coverage of employers that are not listed companies - Pay ratio requirements apply solely to companies with a premium listing on the UK stock market, leaving a substantial gap in data regarding pay and pay gaps at those employees of private non-listed firms, UK subsidiaries of foreign-incorporated parent companies and staff within the public sector.

• Inadequate narrative reporting requirements - Most companies assert that their pay ratio is consistent with pay, reward and progression policies without providing supporting evidence; providing little insight into the factors that cause pay inequality.

To improve reporting and strengthen the value of the pay ratio disclosures, government should:

• Mandate consistent and detailed disclosure of distribution of expenditure on pay - large employers should be required to publish the breakdown of their expenditure on pay, detailing the number of employees in prescribed pay bands and the total expenditure on the pay of the employees in each band.

• Incorporate indirectly employed workers into the pay ratio calculations – reporting requirements should include indirectly employed workers who would be commonly understood as working for the reporting company in the prescribed methodology for the calculation of pay ratios.

• Expand reporting on pay distribution to a wider range of employers – the pay ratio reporting requirements should be applied to a wider pool of companies, equalising reporting requirements and enabling a fuller insight into the pay practices of major employers.

In the longer term, it is time to seriously consider the prospect of a maximum wage expressed as a pay ratio. The UK’s, high, by international and historic standards, levels of inequality and concentration of incomes suggest there is considerable potential to raise incomes by re-balancing distribution. A maximum ratio, which could achieve this pre-taxation, may prove more appealing, empowering and politically durable rather than sole reliance on taxes and transfers to redress inequalities.