After the revelations of the gender pay gap in the UK, government have taken yet another step to create more equal pay among all. Plans are being put forward in parliament today to stop CEO’s from paying themselves unfairly against the average worker.

The news will be very welcome to several thousands of employees who do not feel that the pay for their CEO is fair. According to Pay Scale, the average CEO in the UK earns up to £215,000 per year.

 

wealthy businessman

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What are the new plans?

The new government plan is for all larger scale businesses (with more than 250 employees) to justify CEO pay. They also have to reveal the gap between them and the rest of their staff, starting in 2020. This is being referred to as company ‘pay ratios’, which need to be reported on yearly.

Additionally, the company will also have to predict future share price growth and how that would affect CEO pay. This information will then be available for all workers and investors to see, so no CEO can hide.

pay ratio report

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Why is this happening?

In more recent times, shareholders of these companies have become far more vocal about executive pay levels. ‘Excessive’ pay rewards have been voted against by a number of wealthy shareholders.

The new government plans are thought to be a response to public anger over the collapse of companies such as BHS and Carillion. There has also been an increasing trend of ‘bloated salaries’ for CEO’s in larger businesses.

TUC general secretary Frances O’Grady said: “Fat-cat bosses are masters of self-justification and shrugging off public outcry. New rules are needed to make sure they change.”

crowd protest

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Where do we go from here?

Subject to approval, the new legislation will come into force in January 2019. But will this be enough to create equality when it comes to salaries?

Will workers be satisfied with the new rules? Will CEO’s play by the book? Only time will tell if this is the beginning of a new era for business.

 

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