British workers in the private sector have been warned to expect the smallest pay rises in two years.

The average rise is expected to drop from 4 percent to 3 percent over the next year, according to a survey of 2,000 employers by the Chartered Institute of Personnel and Development.

This would see them falling behind workers in the public sector, where the government has accepted recommendations from independent pay review bodies to award increases of 4.75–6 percent.

Details were revealed as a new study found that the average pay of the chief executives of Britain’s biggest companies rose by around £500,000 last year to £4.98m.

As a result, the nation’s bosses will typically be earning around 120 times the salary paid to an employee.

Pay throughout the economy, excluding bonuses, rose by 5.7 percent in the three months to May, which is above the general rate of inflation of 2 percent. As a result, there has been a small increase in living standards and spending power.

Figures announced this week are expected to put the figure at 5.2 percent with further falls in the rate of increase to come.

James Cockett, senior labour market economist at the CIPD, said that the drop in pay intentions had been expected after a fall in inflation this year.

However, he said: “Many workers will still feel worse off than they did a couple of years ago, so other benefits, like providing flexible working, offering benefits that help to boost take-home pay and taking steps to improve job quality, are in employers’ interest to help support and retain staff.”

Mr Cockett said the higher pay rises promised by the new Labour government to public sector workers are above the figures expected by managers and department heads.

He said: “Pay is the first lever the Government have pulled in trying to make working in the public sector more attractive. However, on its own, it is unlikely to make a significant difference in helping gain candidates for hard-to-fill vacancies.

“Strategic workforce planning to ensure the supply of qualified doctors, nurses and teachers is also important for the long-term success of the economy.

“Among the wider workforce investing in skills and training, people management and technology is key in unlocking productivity gains and relieving some workload stresses, thus leading to stronger economic growth. This will be fundamental in helping all organisations to become fit for the future.”

The figures on the pay packages awarded to the bosses of Britain’s biggest companies were published by the High Pay Centre.

It said the best-paid executive on the FTSE 100 was AstraZeneca's Pascal Soriot, who made £16.85m. Next was Erik Engstrom, boss of analytics giant RELX, at £13.64m, followed by Rolls-Royce CEO Tufan Erginbilgic with £13.61m.

Despite the huge sums, Dame Julia Hoggett, CEO of the London Stock Exchange, said earlier this year the bosses of UK companies are being paid "significantly below global benchmarks". She warned it may make it harder to attract the top executives who can seek better remuneration elsewhere, particularly the USA.

However, the High Pay Centre said: “The huge pay gap between executives and the wider UK workforce is a result of factors like the decline of trade union membership, low levels of worker participation in business decision-making and a business culture that puts the interests of investors before workers, customers, suppliers and other stakeholders.

"These developments have been very good for those at the top, but it is more questionable whether they are in the interests of the country as a whole."