The next step

To further information on the government's Industrial Strategy proposals

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Justify your salary?

Mind the gap. For several years, the government has been concerned about the difference between directors’ and employees’ salaries, particularly the fact that some chief executives have been receiving salaries which are “out-of-step with company performance” . Keen to tackle the issue, it has announced that it intends to force companies to publicly reveal the pay ratios, i.e. pay gap, between directors’ and employees’ salaries and make them justify the difference.

A new headache? The proposed new regulations, which were announced in June 2018, are central to the government’s modern Industrial Strategy and will require Parliamentary approval (see The next step ). Assuming this is forthcoming - and there’s nothing to suggest it won’t be - the new regime will swing into force on 1 January 2019 . This new reporting requirement is a potential minefield, but should you be worried by the government’s proposal?

Size matters. At this stage, the government only intends to force UK-listed companies with more than 250 employees to disclose their pay ratios and explain any difference. The regulations will not apply to non-listed companies. That means the vast majority of small businesses in the UK will be exempt from the new requirement. Whilst the government could extend the provision in the future, it currently has no plans to do so.

Tip. Whilst they won’t have any specific legal rights, employees in smaller companies could try to extract pay ratio information from the board. You can refuse to disclose individual salaries on the grounds it will breach an individual’s GDPR rights.

For further information on the government’s Industrial Strategy proposals, visit http://tipsandadvice-business.co.uk/download (CD 19.19.01).