New law to reveal pay gap between boss and staff

From 2020 onwards, UK companies will be required to be transparent about the pay gap between their CEO and their average employee.

Under the new government law, UK-listed companies with more than 250 employees would have to reveal the different salaries and justify the CEO’s pay, said business minister Greg Clark.

Clark added that the new laws would improve transparency and boost accountability for shareholders and workers.

“We understand the anger of workers and shareholders when bosses’ pay is out of step with company performance,” he said.

Subject to parliamentary approval, the new laws will come into effect from 1 January 2019. Companies would thus be required to publish the reports in 2020.

The rules were first proposed last year by prime minister Theresa May in a bid to tackle soaring executive pay and manage growing resent felt by workers.

Some parties have questioned whether disclosing the pay gap will be enough to force firms to prevent over-paying executives.

Matthew Fell, chief UK policy director at a British employers group, however believed that the new law will help develop better dialogue between boards and employees.

“What’s most important is that all businesses make progress toward fair and proportionate pay outcomes,” he told Reuters.

The move may also be useful to the wider employment landscape as well, said Luke Hildyard, director at a think tank, High Pay Centre.

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