The deadline for larger commercial organisations to publish an annual Slavery and Human Trafficking Statement is fast approaching. Home Office Guidance recommends publication within 6 months of the organisation's financial year end. The transition provisions mean that the first wave of organisations covered by the requirement will be those with financial years ending 31 March 2016 making the first publication deadline 30 September 2016.
Our work in this area includes drafting policies, advising on contractual terms and advising on supply chain auditing. We have been health checking a number of draft Statements ahead of publication. We have also seen an increase in organisations pushing compliance down along their supply chains, requiring reassurance from suppliers that modern slavery is not taking place.
Organisations with financial years ending e.g. 31 December have more time to finalise and publish their Statements. However, a Statement is a public record of action taken during the financial year so the time for taking that action is rapidly running out for all organisations caught by the legislation.
The requirement to publish annual Slavery and Human Trafficking Statements is the first in a number of steps the Government is taking to create greater transparency within businesses. Large employers will soon also need to be more transparent in relation to pay. From April 2018, employers with 250 or more employees will be required to publish certain data to meet their gender pay gap reporting obligations. The Government is also considering proposals to require listed companies to publish their executive pay ratios.
Earlier this summer, Prime Minister Theresa May announced that she wanted to force companies to publish their pay ratios comparing the chief executive's pay to the pay of an average employee. The issue of executive pay has been the subject of a report by Chris Philp MP in early September. You can access a copy of the report here, which highlighted that the total remuneration of the CEO of a FTSE 100 company in 2014 was 150 times higher than the average worker's remuneration and the ratio of CEO to employee pay has doubled in the UK in the last 12 years. The report recommended mandatory publication of the pay ratio between the CEO and the median employee for companies listed on the Main Market.
Questions have been raised as to whether initiatives like pay ratios will actually lead to greater transparency and it has been reported this week that the Prime Minister's proposal to name and shame excessively paid executives has hit a stumbling block.
Government officials have warned that the pay ratio proposal could in fact produce perverse results. For example, an investment bank like Goldman Sachs could actually look more egalitarian in terms of its pay ratio than a retailer such as John Lewis on the basis that the pay ratio in a company with a large number of well paid staff is actually smaller than at a retailer with thousands of lower paid sales staff. It is therefore questionable whether you can effectively compare pay ratios across companies and sectors. In fact, CIPD queries whether the actual intention of the proposal should be to force boards to consider their pay practices and whether the pay gap is justifiable rather than to make comparisons.
According to Downing Street, the Prime Minister has not been put off by this negativity and she will continue to include pay ratios as part of the Government's package of corporate governance reforms to be announced this autumn.
If you require any advice or further information on any of these issues, please contact any member of our team.