Because the UK entered a price of dwelling disaster in current months, personal fairness headhunter Sita Kolossa had a surreal dialog with a consumer about his wage. “He advised me £1mn was not sufficient,” she stated, sounding aghast, noting that this determine excluded his bonus. “I imply, what do I even do with that?”.

Whereas the personal fairness business is a specific beast the place even £1mn could also be thought-about mere pennies for some executives (Blackstone chief government Steve Schwarzman took dwelling $1.1bn in earnings in 2021), the incident highlighted a problem dealing with many chief executives: how do you handle the pay and expectations of the very best earners?

The issue is very acute at a time when the price of dwelling is escalating and firms are prioritising making life simpler for these with the bottom salaries. With many UK public sector staff taking strike motion this winter, after years of efficient pay cuts, a simple response could also be to inform the very best earners to get a grip.

But bosses say they’re dealing with an actual dilemma.

Their highest earners are sometimes probably the most senior individuals, the most important income mills and longest serving staff, who’ve helped foster progress at firms for years. They’re demanding even higher pay. Tight labour markets and a rush to safe high expertise have helped their trigger, as managers calculate that discovering new individuals to exchange senior employees with institutional information would solely value extra money and take extra time.

An countless pot of money may placate everybody. Actuality means making compromises. So what ought to a supervisor bear in mind when coping with their highest earners?

The primary level is that a number of the highest paid people most likely do deserve pay rises. These related to the long-term progress of the corporate are essential and should be recognised as such. Martin Reeves, chair of the BCG Henderson Institute, a think-tank linked to the consultancy, researched enterprise resilience by wanting on the aggressive efficiency of all public firms throughout a 50-year interval.

In durations of turbulence, notably as recessionary pressures take maintain, there may be a bias in direction of having a short-term focus and penny pinching. However aggressive positive factors, Reeves says, come from these firms who flip consideration to the following set of progress priorities. And whereas not each excessive earner is important, firms should defend these people related to its future progress by means of “lively retention measures”, says Reeves, which may embrace remuneration. This might take the type of one-off bonuses, a better wage, long-term incentive plans and different methods to financially reward employees.

The second level is that retaining excessive earners is just not at all times in regards to the cash. CEOs could be extra imaginative and use different levers accessible to indicate an individual’s worth. Particular person recognition can are available in many kinds — a much bigger position, a seat on the decision-making desk or a clearer profession path ahead. A optimistic firm tradition and enticing working circumstances ought to be one other strategy to entice colleagues. Uniting behind a shared firm imaginative and prescient, extra versatile working preparations and higher possession over one’s personal time are perks that cash can’t purchase.

However don’t then shoot your self within the foot by doing silly issues. Outsized payouts on the high when an organization has lower jobs elsewhere, made enormous losses, or embroiled itself in a scandal — or if there may be little or no leeway to assist these on the lowest finish of the pay construction — will imply senior managers routinely develop into a goal of employee ire and unfavorable press.

Lastly, take note of the differential between the very best and lowest paid. Whereas the pay of chief executives at all times appears to be in focus, on this atmosphere the highest band of earners ought to all be careful. This can be a reflection of company tradition and it impacts the motivation of a big a part of the workforce, says Georg Wernicke, who conducts analysis on technique and enterprise coverage at HEC Paris enterprise college.

“You wish to pay the very best earners a enough quantity to incentivise them to steer the corporate by means of tough occasions but additionally sufficient that you would be able to retain them as employees. However you’ll even be pressured by unions, the general public, and the media to pay them one thing that’s truthful, notably for those who’re chopping the workforce,” he stated.

As staff push for higher transparency on pay, the problem of the differential will solely develop into extra essential. Wernicke added: “There’s room for the highest earners to be humble.”

If an government crew is extremely motivated by pay, likelihood is enterprise leaders and boards will at all times be battling that frontier and it may very well be one thing innate to the tradition of a specific firm. Whether it is now not working, it’s one thing that must be handled structurally and alter has to start out on the high.

anjli.raval@ft.com