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Big Companies Will Need to Report Pay Ratios

New laws have been laid before Parliament that will require UK listed companies with more than 250 employees to justify their chief executives’ salaries and reveal the gap to their average UK worker. 

The move follows concerns that some chief executives have been receiving salaries that are out-of-step with company performance.

The Government says that these new regulations are part of a package of reforms that will hold big businesses to account for the salaries they pay, while giving employees a greater voice in the boardroom.

In addition to the reporting of pay ratios, the new laws will also:

  • require all large companies to report on how their directors take employee and other stakeholder interests into account
  • require large private companies to report on their responsible business arrangements
  • require listed companies to show what effect an increase in share prices will have on executive pay to inform shareholders when voting on long-term incentive plans

“Pay ratios provide an insight into the culture and employment practices of major companies that is useful to investors, workers and wider society alike,” commented Director of the High Pay Centre, Luke Hildyard. “This is a welcome move that will greatly improve public understanding of the pay gap between those at the top and low and middle-income earners.”

“We hope that it will initiate a more informed debate about what represents fair, proportionate pay for workers at all levels,” he added.

Subject to Parliamentary approval, the regulations will come into effect from 1st January 2019 meaning that companies will start reporting their pay ratios in 2020.

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