Pay Ratios

Another one of our predictions for 2018 was the prospect of pay reporting being expanded from gender to include race and pay ratios. On 19th July 2018, the Companies (Miscellaneous Reporting) Regulations 2018 were published following Parliamentary approval. This measure has been touted for some time as a means to get employers to address growing wage inequality via the carrot instead of the stick.

Like Gender Pay Gap Reporting, the regulations will apply to companies with 250 or more employees and they must gather pay data about each quartile of the pay structure and then compare them in comparison to the CEO. The regulations will come into force in January 2019 with companies expected to publish their data in 2020.

Unlike gender pay regulations, pay ratio reporting will be stated in the Director’s report, not uploaded to the government portal but the data will still need to be in an obvious place on their website.

The Government has uploaded a list of FAQs together with the final regulations. One point worth noting is that CEO pay may vary year to year depending on LTIP share dividends and bonuses which would skew ratios. Furthermore, like the gender pay regs, the pay ratio regs have very few punitive measures for non-compliance. What is clear though, is that companies with large gaps will suffer large reputational damage as we saw with gender pay reporting.