Pay ratios: Why firms will need to justify CEO pay

Business Secretary Greg Clark has announced that all large firms will be required to publish the pay gap between their Chief Executive and an average worker.

All firms with over 250 members of staff will need to explain the difference, which is known as the pay ratio.

Peter Cheese, Chief Executive of the CIPD, welcomed the news, adding that there needs to be a clearer link between top pay and business performance. “The first year of gender pay gap reporting has shown us that the publication of pay data can help to bring pay practices into focus,” he said.

“We hope that the new laws on pay ratios will make organisations really question whether CEO pay is appropriate and proportionate to personal performance and business outcomes.”