For the purposes of executive pay ratio reporting, how do companies calculate employees' pay?

Under the Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860), quoted companies with more than 250 employees are required to publish the ratio between their CEO's total remuneration and the pay and benefits of employees on the 25th, 50th (median) and 75th percentile of pay and benefits of the company's UK employees for the relevant financial year.

Employees' "pay and benefits" for this purpose means the full-time equivalent pay and benefits, which are calculated using the components listed in para.7 of sch.8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410). The components are:

  • wages and salary;
  • all taxable benefits (gross value);
  • performance-related pay or other assets, depending on when they were awarded and how final vesting is determined; and
  • pension-related benefits.

These components largely reflect those that employers must use to calculate the CEO's total remuneration for the purpose of calculating the ratio.