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New UK Laws to Require Companies to Reveal Worker to Boss Pay Gap

January 29, 2019

As part of the efforts to tackle soaring executive pay, new proposed UK government will require Britain’s biggest companies to publish the gap between the salary of their chief executive and what they pay their average UK worker. Planned to set out in 2020, the new rules mean that UK-listed companies with more than 250 employees would have to reveal their pay gap and justify their CEO’s salary.

The new laws, which are subject to parliamentary approval, are part of the government’s “Industrial Strategy” and will come into effect from Jan. 1 2019, meaning companies will start reporting in 2020.

In a statement, Business Minister Greg Clark said that the new laws are expected to improve transparency and boost accountability for both shareholders and workers, as well as helping to build a fairer economy. “We understand the anger of workers and shareholders when bosses’ pay is out of step with company performance,” he added.

Addressing the widening pay gap between executives and average workers has been Prime Minister Theresa May’s promise early on in her tenure. She came to power after the 2016 Brexit vote vowing to tackle what she called the “unacceptable face” of capitalism, including pay gaps and mismanaged takeovers, which had driven a wedge between British bosses and their workers.

But some campaigners and investors have questioned whether the greater transparency provided by disclosures on boss to worker pay will be enough to force companies to curb pay excesses, Reuters reports.

Matthew Fell, chief UK policy director at British employers group, the Confederation of British Industry, said that the new legislation would help develop a better dialogue between boards and employees. “What’s most important is that all businesses make progress toward fair and proportionate pay outcomes,” he said.

On the other hand, Luke Hildyard, director of think tank, High Pay Centre, said the insight into pay ratios would be useful to investors, workers and wider society. “We hope that it will initiate a more informed debate about what represents fair, proportionate pay for workers at all levels,” he said.

The plan to make public the worker to boss pay gap comes after May has already implemented rules to highlight pay discrepancies between genders.

Earlier this year, all companies in UK with 250 or more employees were asked to publish details of the salary difference between male and female employees. They will report back annually on that pay gap.

Read also: Top Executives in UK Paid 133 Times More than Average Workers: Study

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