Picture: ISTOCK
Picture: ISTOCK

London — Britain’s biggest companies will from 2020 be legally required to publish the gap between the salary of their CE and what they pay their average UK worker, under proposed new government rules.

Business Minister Greg Clark said on Sunday the government would set out laws in Parliament on Monday, which meant that UK-listed firms with more than 250 employees would have to reveal their pay gap and justify their CEO’s salary.

"We understand the anger of workers and shareholders when bosses’ pay is out of step with company performance," Clark said. He said the new laws would improve transparency and boost accountability for both shareholders and workers, and help to "build a fairer economy".

The new laws, which are subject to parliamentary approval, are part of the government’s "Industrial Strategy" and will come into effect from January 1 2019, meaning companies will start reporting in 2020. When these rules were first proposed in 2017, they were criticised by union leaders who said that they fell short of Prime Minister Theresa May’s promise early on in her tenure to tackle soaring executive pay.

She came to power after the 2016 Brexit vote vowing to tackle what she called the "unacceptable face" of capitalism, including pay gaps and mismanaged takeovers, which had driven a wedge between bosses and their workers.

But some campaigners and investors have questioned whether the greater transparency provided by disclosures on boss to worker pay will be enough to force companies to curb pay excesses. Matthew Fell, chief UK policy director at employers group, the Confederation of British Industry, said the legislation would help develop a better dialogue between boards and employees.

"What’s most important is that all businesses make progress towards proportionate pay outcomes," he said.