Small company bosses are increasingly reliant on performance-related pay or bonuses, according to the latest survey of the 250 or so companies in the FTSE SmallCap index.

The survey by Hewitt New Bridge Street, an executive remuneration consultancy, shows that variable pay accounted for 40 per cent of the total executive reward package, up from 35 per cent in 2007.

The median bonus is now potentially 100 per cent of an executive’s salary, up from 80 per cent last year, and comparable with FTSE 250 companies. The maximum bonus potential has doubled in five years.

Average base salaries are running at up to 6 per cent higher than last year. But base salaries remain lower for the small caps – a median of £315,000 for the highest paid director compares with £460,000 for the FTSE 250.

The gap widens if maximum bonuses are achieved, with a median of £695,000, and paying more than £1.1m for the highest paid FTSE 250 director.

The small cap directors are also less likely to have defined benefit pension schemes, which are now on offer in only 24 per cent of companies, down from 30 per cent last year.

However, Rob Burdett, the author of the survey, said worsening economic conditions would pose problems for remuneration committees.

Some shareholders see any reduction in targets for long-term incentive plans, which typically track three-year performance, as moving the goal posts.

Mr Burdett believes the survey holds lessons for companies in the FTSE Fledgling index and on Aim, where old-fashioned option schemes are more prevalent. Long term incentive plans, he argues, are much less dilutive, are more efficient under the new accounting rules and are more effective given the volatility of small company share prices.