UK's biggest firms will have to justify pay gap between bosses and their workers
Big firms will have to justify their chief executives’ salaries and reveal the gap to their average UK worker, under new laws to be laid in Parliament tomorrow (Monday 11 June).
- For the first time ever, listed companies will legally be required to annually publish and justify pay difference between chief executives and their staff.
- the directors of all large companies will also have to set out how they are acting in the interests of employees and shareholders.
- reporting is part of the government’s modern Industrial Strategy which is helping ensure the UK remains a world-leading place to invest and do business.
It means that for the first time, UK listed companies with more than 250 UK employees will have to disclose and explain this difference - known as ‘pay ratios’ - every year.
This follows concerns that some chief executives have been receiving salaries that are out-of-step with company performance.
These new regulations are part of a package of reforms which will try to hold big businesses to account for the salaries they pay, while giving employees a greater voice in the boardroom.
Business Secretary Greg Clark said:
One of Britain’s biggest assets in competing in the global economy is our deserved reputation for being a dependable and confident place in which to do business.
Most of the UK’s largest companies get their business practices right but we understand the anger of workers and shareholders when bosses’ pay is out of step with company performance.
Requiring large companies to publish their pay gaps will build on that reputation by improving transparency and boosting accountability at the highest levels, while helping build a fairer economy that works for everyone.
Subject to Parliamentary approval, the regulations will come into effect from 1 January 2019 meaning that companies will start reporting their pay ratios in 2020.
Credit: BEIS (changes made)