Firstly, what is the Executive Pay Gap report? This means the UK’s biggest listed companies must now justify the gap between senior executives and their staff. In other words, businesses will have to justify the difference between senior executive salaries and average annual pay for employees. This is different to the Gender Pay Gap reporting because Executive Pay reports on seniority and not gender. This forms part of the government’s plan to improve transparency around senior executives’ remuneration. MPs also hit out at companies for failing to pay the living wage to its lowest-paid workers. Secondly, will this affect you as well as your business? The below 3 points will give you clarity.
What will the Executive Pay Gap report on?
As mentioned above, this report will divulge how much Senior Executives from UK’s biggest listed companies earn compared to their employees. This will not only include their remuneration but also bonus payments as well as share-based incentives.
Will this affect every Senior executive?
No. According to GOV.UK, this report is only applicable to Senior executives in companies that have more than 250 employees within the UK.
When will this be implemented?
The Executive Pay Gap reporting was implemented in January 2019 however, figures will only be released in 2020. Remuneration of executives will be under the microscope.
In conclusion, 360 Law Group say that the concept of reporting on executive pay may seem somewhat straightforward. However, in practice, employers could encounter several problems along the way. Firstly, the nature of executive pay differs greatly to that of the average employee. With the legal obligation to include bonus payments as well as share-based incentives, the calculation could become complicated. What’s more, companies will also be required by the new regulations to report on full-time-equivalent pay for the UK workforce. In other words, employers who outsource certain functions or take independent contractors may have inaccurate results between the highest and lowest paid employees.