Water executive pay rises despite 2025 bonus curbs

Senior executive pay at water companies in England and Wales increased in the latest fiscal year despite reforms intended to limit certain performance-linked rewards, according to sector pay data and officials’ statements. Total executive compensation across the sector rose by 1.5% to £25.3 million, the data shows. Officials said companies responded to the tighter rules by changing how remuneration is put together while keeping overall packages broadly intact.

The rise comes as the sector remains under public and political scrutiny, with pay decisions drawing criticism even as regulatory powers are defined by what legislation permits. Officials said the recent changes have constrained specific bonus designs rather than setting an overall ceiling on senior pay.

Special Measures How the Water (Special Measures) Act of 2025 applies Officials said the Water Officials said the Water (Special Measures) Act of 2025 gave the regulator a targeted power to block particular performance-related bonus arrangements. The approach is intended to stop payments that are explicitly tied to performance measures under the affected rules. Officials emphasised that this authority is bounded by the scope of the legislation. Under the current framework, officials said the regulator does not have the ability to intervene across all categories of senior pay. That means it cannot cap total compensation packages, even if elements of bonus design fall within its remit. Companies shift pay into non-bonus components Officials said companies have increased executive compensation through routes that sit outside the regulator’s current powers. Boards have raised fixed salaries, allowances, and other non-bonus payments as an alternative way to sustain overall remuneration when some bonus structures are restricted. Officials described the practical effect as a rebalancing of pay rather than a reduction in the total amount. As long as the Act remains focused on specified bonus structures, officials said overall packages can still rise even when performance-related rewards are tightened.

Retention deals and signing fees become more prominent

Officials said some firms have leaned more heavily on retention agreements and signing fees to protect or increase pay for senior roles. They said these mechanisms have been used for top positions, including chief executives and chief financial officers. Officials described such payments as tools that can be presented as supporting leadership continuity when bonus options are constrained. Officials also said the increased use of these Officials also said the increased use of these mechanisms has softened the intended impact of the government’s reform measures, because it allows companies to sustain total remuneration without relying on bonus designs that may be blocked.

Political criticism and a review due in autumn

Government officials have criticised the payments as unacceptable, linking their objections to what they described as performance failures at the utilities involved. Officials said the criticism highlights the political sensitivity of executive pay in a sector facing scrutiny, but does not expand the regulator’s statutory powers.

The regulator is due to review the effectiveness of the post-Act rules this autumn, officials said. They said the assessment is expected to consider whether the restrictions are achieving their policy goals in practice. Officials said uncertainty remains over how far the review can influence total pay outcomes without changes to the legislative scope, given companies’ ability to keep shifting remuneration into categories outside the regulator’s intervention powers.