SMF push for companies to address pay progression for low paid workers

SMF push for companies to address pay progression for low paid workers

On 11 October, think tank Social Market Foundation (SMF) released a report focused on how to encourage businesses to use their decision-making to promote wage and career progression amongst low paid workers.  The report brings into focus tax and regulatory policies which could be put into place in order to drive change in these areas. 

SMF is an independent charitable organisation which aims to ‘stimulate public discussion on the performance of markets and the social framework within which they operate’. The organisation notes that a lot has been done in recent years to increase the wage floor, with the government increasing minimum wage in April 2018 to £8.21, aiming to increase this to £10.50 by 2024. However, SMF notes that despite these efforts ‘the minimum wage is acting as a ceiling’ for many workers.  Resultantly, the report sets out numerous recommendations which urge the government to do more to address these issues.  These recommendations include:

•            Strengthening company law

•            Issuing official guidance on pay levels and progression

•            Using stakeholder pressure

•            Accreditation schemes

Amongst the recommendations is the suggestion that directors take responsibility to ensure employees at all levels share in the proceeds of company growth. The report proposes this is done by amending s.172 of the Companies act 2006 in order to encapsulate this change. It goes on to further state that adherence to this section should be monitored. S.172 sets out the duty of the director to ‘promote the success of the company’ and states that the interests of employees must be considered when demonstrating this duty.

The government has already tightened regulations around this area with the release of the revised UK Corporate Governance Code 2018 (effective as of January 2019), which requires companies to disclose compliance with s.172 to shareholders. The revised code recommends that there is more engagement with the workforce, for example by having a director appointed from the workforce and states that there should be disclosure regarding the company’s approach to rewarding the workforce.  Alongside this, The Companies (Miscellaneous Reporting) Regulations 2018, which is

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