Pay ratios between bosses and workers

New corporate governance reforms have recently been announced which will mean that all listed companies will have to publish the pay ratio between bosses and workers. These are due to come into effect by June 2018.

Comparing salaries of top executives with average workforce

The new laws will force around 900 publicly listed companies to reveal and justify the difference between the pay of top executives compared with the average pay of their UK workforce.

They will also have to explain changes to the pay ratio from year to year, setting the ratio into context of pay and conditions across the workforce.

Under the new regime, any listed companies where there has been significant shareholder opposition to executive pay will also have their names published in a public register.

Representing employee interests at board level

Paul Burton, Head of the Employment Team at Frettens, says “Under this corporate governance reform, the government will ask the Financial Reporting Council to introduce a new requirement in its UK Corporate Governance Code. This will aim to ensure that employees’ interests are better represented at board level.

“Companies will have to either create an employee advisory council, assign a non-executive director to represent employees or nominate a director from the workforce. The government may want to roll these reforms out to smaller companies in the future – time will tell.”.

At Frettens, all of our solicitors offer a free initial meeting or chat on the phone to answer your questions. If this article raises issues for you or your business, please call us on 01202 499255 and Kate or Paul will be happy to discuss it with you.