Accounting for People is a CAN project abbreviated to ‘People CAN’ for ease.
People CAN recognises that the employees of a company are one of the key stakeholder groups to whom a company should report on its activities. However, for reasons noted here, well over 90% of UK companies do not provide accounting information that any of their employees might access unless they also happen to be either shareholders or directors of the company in question. That means that very large numbers of employees in the UK are at risk as a result of being employed by companies about whose financial credibility, let alone their ownership or management, they can know nothing.
The CAN thinks that, like all stakeholders, the employees of a company should have free access to the accounts that a company produces for its employees. But the CAN also thinks that this does not for far enough in the case of employees: the information currently supplied by companies about their employees does not provide them with the information that they need to appraise its activities as they impact them in the vast majority of cases.
There was a time when all UK companies had to report:
- The number of staff that they employed on average in a year both in the UK and elsewhere;
- The cost of employing those staff;
- The number of staff considered to be on higher bands of pay, disclosed in quite narrow bands;
- Directors’ remuneration, including separate disclosure of the payment made to the highest paid director.
This requirement has now long gone for most companies. Only larger UK companies now have to disclose:
- Directors’ remuneration;
- The pay of the highest paid employee;
- Remuneration of the key management group, which can include those other than directors;
- The average number of employees;
- The cost of employing staff, split between pay, pension costs and other related employment costs e.g. social security contributions and long term bonus and incentive arrangements;
- The cost of pension arrangements, employee benefit trusts, share options and other such financial arrangements, often in considerable detail.
The result is that most small companies do not have to make disclosure of almost any information relating to their employees. No doubt this is because it is presumed that those employees will not get access to that information.
The CAN thinks that all employees who are at risk as a result of being employed by a limited company where those employees’ risk of exposure to material financial loss will often be greater than that of any shareholder should have full access to the information that they need to appraise the risks that they face as a result of their employment. We accept that this may not be required in full when there are ten or fewer employees: in those cases it is likely that sufficient informal communication networks will exist for some risks to be appraised without accounting disclosure, but this exception apart we think that there is a duty on all companies to disclose:
- The average number of employees during a year, split by gender;
- Total pay, split by gender;
- The additional costs of employment including social security costs, pension costs, incentive and bonus arrangements costs and the cost of other benefits provided, split by gender;
- The remuneration of the board as a whole, split as for employees, with separate disclosure of the pay of the highest paid director;
- The number of staff paid more than £50,000 in basic pay in a year, and by bands of £50,000 upwards thereafter in successive bands of equal value, reported by gender;
- The gender pay gap of the company;
- The ratio of highest to lowest pay in the company;
- Disclosure as required at present for larger companies on pensions, share options, employee benefit trusts and other incentive arrangements;
- Non-financial data, including a statement describing the action that has been taken during the period to introduce, maintain or develop arrangements aimed at involving UK employees in the entity’s affairs. This should describe:
- How relevant information on the company’s performance and related issues is supplied to employees on a timely basis;
- Employee consultation processes that ensure that employees’ views are taken into account in making decisions that are likely to affect their interests;
- Pay consultation arrangements, including union recognition arrangements;
- What arrangements are made for the employment of people with disabilities and how they are integrated into the company’s activities;
- The company’s training programmes, including the number participating in them; how access to them is decided upon and the total annual training budget;
- How sickness, holiday and other relevant employee arrangements are negotiated and managed.
Our aim is to consult on and develop a draft accounting standard around these requirements and to promote it for the benefits of the employees of all companies.