UK regulator urges reporting of workforce metrics

Recent regulatory requirements, such as the 2018 UK Corporate Governance Code and the requirement to disclose the ratio of the CEO’s pay to groups of other workers, have put increased emphasis on UK companies’ reporting on workforce issues.

At the same time investors face more pressure to report more fully on environmental, social, and governance issues under new UK Financial Conduct Authority rules, including the UK Stewardship Code 2020 (see, “Revising the UK’s Stewardship Code”).

These two pressures provide context for the UK Financial Reporting Council’s (FRC) Financial Reporting Lab’s recently published report that provides series of questions to help companies in their development of reporting on workforce issues.

Phil Fitz-Gerald, director of the Lab, said the opportunities and risks for investors have changed as workforces have evolved. It meant that investors are demanding improved reporting on matters such as workforce structure, employee retention and turnover, and workforce engagement.

He added: “Given the competition for talent, investors are also interested in how companies intend to support the development of their workforces in a sustainable, long-term fashion.”

The full report, Workforce-Related Corporate Reporting: Where to Next?, provides practical advice in four areas: governance and management, business model and strategy, risk management, and metrics and targets.

The FRC advises that companies should report on:

• The oversight of workforce-related matters. This includes how the board engages with the workforce and the impact the board’s consideration of workforce matters has had on strategic decisions.
• Who the company considers its workforce to be. This includes total headcount, demographics, and employment composition such as direct employees, contractors, and/or others in the supply chain.
• How each aspect of the workforce creates value for the organisation. In addition, companies should report on the opportunities to grow that value, including how the workforce model links to the business model.
• The risks and opportunities related to the workforce. Companies should report on how they are responding to these, how the risks were identified, and where they are in the business, including health and safety metrics.
• How the desired culture is being driven from the top. This includes how “buy in” has been achieved from the workforce and how culture and values help achieve the company’s strategy. It encompasses employee engagement; retention and turnover (both planned and regrettable); the values being applied in the working environment; and other measures of culture that the company monitors.
• How the company is enhancing and incentivising its workforce to deliver value. This should include information about remuneration and other benefits, training and development, and progression.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.