Independent think tank The Social Market Foundation (SMF) has recommended that organisations publish data on wages, career progression, training budgets and HR practices in order to influence remuneration decisions and mitigate low pay.
The Pay progression for low-paid workers – Research paper 2: The role of corporate decision-making report, published today (Friday 11 October 2019), centres around how to encourage employers to use corporate decision-making to promote wage and career progression among low-paid staff.
The report suggests greater transparency requirements around pay progression and training, stating that organisations should be required to publish data on wages, career progression, training budgets and HR practices; this is designed to influence better pay practices in order to avoid organisations attaining a negative public image and reputation.
The report proposes that section 172 of the Companies Act 2006 should be amended. First, it should require directors to ensure and demonstrate that staff share in the proceeds of organisational growth. Second, reporting requirements within Section 172 would be amended to oblige firms to create a narrative report explaining wage-setting decisions; this report would also provide a strategy for supporting pay and career progression, as well as setting key targets.
SMF further recommends that the government publicise sector rankings and league tables, detailing the organisations with the largest pay ratios and the worst records of pay progression, as well as encouraging shareholder activism; this would include third parties considering how the treatment of low-paid staff could feature more prominently within environmental, social and government (ESG) criteria.
The report further suggests the adoption of sector specific guidance on pay progression; this, it believes, could encourage employers to adopt best practice, as well as outline for staff what paths and pay expectations are available for them at different stages of their career. SMF also thinks that accreditation schemes can highlight employers that are providing equal training opportunities across their workforces.
Nicole Gicheva and Scott Corfe, the report’s authors, summarised: “Successive governments have done much to increase the wage floor over the last 20 years, and the Low Pay Commission is near to fulfilling its target of reaching 60% of median earnings.
“Despite these achievements, the UK still has a very significant low pay problem. About a fifth of employees earn less than two thirds of the median hourly wage, contributing to high levels of in-work poverty. Not only are many on low pay, but many remain stuck on low pay for considerable periods of time. Only a sixth of low-paid [employees] in 2006 managed to consistently escape low pay by 2016.”