Workplaces with big differences between the pay of staff are hit by more industrial disputes and sickness rates, according to a new study.
Research by the High Pay Centre think-tank also found that firms with huge gaps between the highest and lowest paid employees also had a higher staff turnover.
A survey of almost 2,000 workplaces found that those where bosses were paid 10 times more than the lowest-earning staff were involved in industrial disputes at least once a year, more than those with lower pay differentials.
High Pay Centre director Deborah Hargreaves said: "High executive pay is not only frequently unmerited, but has a huge hidden impact on the rest of the organisation and society as a whole.
"Whether it's through staff turnover, sickness, low morale or industrial action, big pay gaps undermine employees' loyalty to the company and their managers.
"Employers suffer lost productivity, have to pay more sick pay and legal and recruitment costs as staff left feeling the financial and emotional strain are driven even further into the ground."
The report added that executive pay had jumped by 450 per cent over the past 12 years compared with 16 per cent for workers on average levels of pay.
The High Pay Centre questioned whether an employee was likely to be more motivated if their boss was paid many times more than them.