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Do you have a handle on company salaries?

 

Today the government is setting out new laws in Parliament which mean that from 2020 UK listed companies with more than 250 employees will have to reveal the pay gap between the salary of their chief executive and what they pay their average UK worker in a move to help justify their CEO’s salary. This comes after changes earlier this year forcing companies to publish pay discrepancies between male and female employees.

The pay ratio debate

We understand the anger of workers and shareholders when bosses’ pay is out of step with company performance Greg Clark, Business Minister said in a statement on Sunday.

He said the new laws would improve transparency and boost accountability for both shareholders and workers, as well as helping to “build a fairer economy”.

The new law, if approved by parliament, is part of the government’s “Industrial Strategy” and will come into effect from Jan 1 2019, meaning companies will start reporting in 2020.

The proposals have met mixed reactions for UK workers and senior figures. On the one hand there is concern that they don’t go far enough in addressing the excesses and greed of many ‘fat cat’ companies and bosses. On the other, it is definitely a step towards recognising the problem and helping to open conversations between bosses and their employees. There will undoubtedly be continued debate over what represents fair and proportionate pay and a need for greater transparency, which may help close the pay gap for those businesses who cannot justify top level salaries.

Are your salaries competitive? The importance of benchmarking

The legislation does mean that businesses need to have a handle on average salaries for roles within their industry, something they should be doing anyway if they want to attract and retain the best talent. In fact, we have seen an increase recently in clients approaching us to carry out salary benchmarking work on their behalf in order to gain a good understanding of the competitiveness of their business in terms of salaries and benefits in comparison to similar organisations within their market sector.

Offering a competitive remuneration package is also important if company's don’t want to risk losing their top executives to offers of better pay packages from competitors, and to prove to shareholders that senior staff provide value for money. With variations in pay potentially being the difference between retaining or losing highly valued directors and keeping shareholders happy, salary benchmarking can be vitally important to the success of an organisation.

In conclusion, any legislation that drives accountability for pay levels, and helps to reduce unjustified pay gaps, should be a good thing. The best companies are already taking ownership of this issue, giving greater access to salary information and regularly reviewing formulas for calculating pay. Businesses who are not addressing pay ratios are going to need to start thinking about a more transparent and structured approach as part of their recruitment and wider strategy.

 

Newman Stewart has access to a wide range of market information across many specialist sectors which enable us to provide an up-to-date, comprehensive benchmarking service to ensure that your business remains desirable compared to the opposition when it comes to attracting and retaining talent. We have recently undertaken several projects for our clients including research benchmarking for Managing Director packages in Singapore within the bulk materials handling sector.

If you would like an impartial and accurate idea of pay information to help your business make informed and effective remuneration decisions, and to ensure you are attracting the best candidates to your vacancies, get in touch.