Fat Cat Tuesday: What is the day and does it highlight an unfair pay gap?

Today is 'Fat Cat Tuesday', according to a pressure group, which claims that 4 January marks the day when the average FTSE 100 chief executive will have earned more than the average worker in the UK makes all year. The High Pay Centre think-tank group states that top bosses earning £5m a year will have already out-earned workers on the median UK salary of £27,645. It says Fat Cat Tuesday is aimed to highlight the "unfair pay gap".

HPS director Stefan Stern said: "Fat Cat Tuesday again highlights the continuing problem of the unfair pay gap in the UK. We are not all in this together, it seems, Over-payment at the top is fuelling distrust of business, at a time when business needs to demonstrate that it is part of the solution to harsh times and squeezed incomes, and is promoting a recovery in which all employees can benefit."

The pressure group found that the annual earnings of a full-time employee in Britain in 2015 marked a rise of only £445 (1.6%) on the previous 12 months. In comparison, it claims, FTSE 100 bosses received an average of £4.96m (based on 2014 data), with a chief executive's annual incentive award increasing by almost 50% of salary.

This year, the HPC estimates that chief executives earn an average of £1,260 an hour, meaning they need to work 22 hours to reach the median full-time salary of an UK worker. If the chief executive started work on Monday 4 January, this would take them to the afternoon of Tuesday 5 January.

Criticism

However, the calculations behind the day have been criticised by some groups. The HPC uses a calculation to estimate the number of hours the average FTSE 100 chief executive has to work to earn the average annual salary of a full-time worker in the UK. However, it uses a mean average for the chief executive pay and a median average to calculate the employees' pay.

The Adam Smith Institute said the day was based on "pub economics" rather than "serious analysis". Executive director of this think tank, Sam Bowman, said: "None of these complaints are valid unless the High Pay Centre thinks it has a better way of estimating the value of executives to firms than those firms themselves. Can the High Pay Centre tell us how much CEOs are worth? If not, how can they say that they are overpaid?

"Chief executives can be worth quite a lot to firms, as is shown by huge moves in company share prices when good CEOs are hired, or bad CEOs are fired. Steve Jobs can make a firm; Steve Ballmer can break a firm. The High Pay Commission's complaints only make sense if you assume firms don't actually care about making money – which is to say, they don't make sense at all."