UK's biggest firms will have to justify pay gap between bosses and their workers

11 June 2018

Under new laws being laid in Parliament today (11 June 2018), UK listed companies with more than 250 UK employees will have to disclose their chief executives’ salaries and reveal the gap to their average UK worker - known as ‘pay ratios’ - every year.

These new regulations are part of a package of Corporate Governance reforms which will hold big businesses to account for the salaries they pay, while giving employees a greater voice in the boardroom.

For the first time ever, listed companies will legally be required to annually publish and justify pay difference between chief executives and their staff. This follows concerns that some chief executives have been receiving salaries that are out-of-step with company performance.

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.

 

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.

The new regulations form a core part of the government’s modern Industrial Strategy which aims to build on the UK’s strong reputation and make sure our largest companies are more transparent and accountable to their employees and shareholders.”

 

In addition to the reporting of pay ratios, the news 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.