Executive pay to be linked to rank-and-file salaries

Vince Cable, the Business Secretary, said that shareholders would get new powers to enforce executives’ pay deals, and that they would be told to take account of “pay differentials” between the best-paid and ordinary workers.

Independent analysts said the changes would leave Britain with the toughest rules on executive pay in the world.

Conservative MPs described Mr Cable’s statement as “claptrap” that would harm the economy. Labour said the plans did not go far enough because workers would not get seats on company remuneration committees.

Mr Cable announced a formal consultation on giving shareholders a legally binding vote on executive pay in public companies’ remuneration committees. He also proposed a minimum threshold of 75 per cent support for a pay vote to be successful. That requirement would have blocked recent pay deals at major companies, including National Grid, Xstrata and WPP.

The announcement follows calls by all the main party leaders for British capitalism to be reformed to reflect public concerns about corporate influence and wealth inequality.

Other changes proposed include “clawback” rules for bonuses, forcing bosses to pay back money if a company’s long-term performance declines. Other rules would push companies to widen the range of people sitting on their pay committees, to include more outside experts.

New transparency requirements would also mean that companies would publish a single figure for the total pay, bonuses and other benefits for each director, and an explanation of how that pay related to company performance.

Mr Cable said: “Remuneration committees will be expected to explain why they have used specific benchmarks and how they have taken employee earnings — including pay differentials — into account in setting pay,” he said. He stopped short of demanding companies publish a “pay ratio” between top and bottom earners, saying such ratios were not always useful or accurate.

Sean O’Hare of PricewaterhouseCoopers, the accountancy firm, said Mr Cable’s changes would create the toughest pay regime of any advanced economy.

“Nowhere else in the world will executives see their pay subject to such rigorous checks and scrutiny,” he said.

He predicted that the changes would not necessarily result in pay cuts, because institutional shareholders would be “loathe to use the binding vote” against executives. John Cridland of the CBI business lobby, said greater transparency was welcome, but raised concerns about binding remuneration votes.

“Such a change does not make for good corporate governance as investors will be second-guessing and ‘man marking’ directors,” he said.

In the Commons, Conservative MPs attacked the pay plans as unnecessary interference.

Philip Davies described Mr Cable’s speech as “drivel” that would hamper British companies. “Get off their backs and let them get on with creating wealth,” he told the minister. Peter Bone, another Tory backbencher, said Mr Cable’s proposals were “liberal, Left-wing claptrap” that would do “nothing to increase growth and employment in this country”.

By contrast, Labour said that the rules were inadequate. Chuka Umunna, Mr Cable’s Labour shadow, said the plans “do not go far enough in promoting the transparency, accountability and fairness that people want to see”.

ÞHigh-earners should pay more tax, a senior Liberal Democrat MP has said. David Laws, a close ally of Nick Clegg, said ministers should “clamp down on reliefs and allowances that particularly tend to favour people at the very upper end of the income distribution”.

Telegraph

News Work/life balance ranks higher than stress as the biggest health concern for employers

Work/life balance is the top health and wellbeing concern for employers – ahead of stress and mental health issues – according to a survey of medium and large employers by Group Risk Development (GRiD).

After enduring a difficult year where many businesses were obliged to reduce headcount, the survey of 500 employers with 5-1000 employees from the trade body for the group risk industry, found maintaining a good work/life balance for staff remaining in the business ranked as the top health issue for more than one in five employers (21%). This is ahead of stress and mental health issues (19%) – currently cited as the most common cause for workplace absence.

The results suggest employers appreciate a long hours culture can be beneficial in the first instance but can lead to problems with morale and could further increase stress related absence in the longer term.

Just under a third (32%) of employers suggest their absence rate has improved over the last 12 months with 50% believing their absence rate is lower than the industry average.

Survey respondents seem poised to take action to improve the situation in 2012. More than one in three (38%) said taking steps to improve work/life balance was top priority. By comparison, 27% said actively managing workplace stress was their key goal.

Katharine Moxham, spokeswoman for GRiD, said: “A strong work/life balance is often overlooked as a major health issue to businesses, compared to more direct factors such as dealing with chronic conditions. But, the economic situation seems to have provided a timely reminder for businesses to take action to rectify unsustainable working practice.

“In times of increased economic pressure it is particularly important for employers to consider the impact a long hours culture can have on the wellbeing of their employees and to develop strategies for dealing with the fall out such as, for example, increased stress related absence.

“As welfare reform moves forward, any business that has already embraced the value of integrated health, wellbeing and absence programmes will feel vindicated while businesses that have not already understood how crucial this is will come to do so.”

EU pensions regime could cost UK employers £500 billion and decimate jobs market, experts claim

Employers would have to inject at least £300 billion into their final salary (defined benefit) pensions if a new EU law goes ahead, causing damage to the UK economy and jobs market.

The National Association of Pension Funds (NAPF) warned it would also lead to the closure of more final salary pensions in the private sector.

The NAPF issued a stark warning in its response to the European Insurance and Occupational Pensions Authority (EIOPA) on the review of the Institutions for Occupational Retirement Provision (IORP) Directive.

To enhance the security of occupational pensions across EU member states, EIOPA is proposing the application of a ‘Solvency II type capital regime’ to assess the solvency of pension funds.

Under this system, which has been designed for insurance companies, pension funds would be required to increase their funding levels, making the provision of pensions much more expensive.

This would lead to employers paying more at an already difficult economic time, leaving them with less money for investment and job creation.

PwC’s estimate for cost for UK business if the rules were implemented is up to £500 billion, depending on how much leeway there is for healthier businesses.

EU proposals to adapt solvency capital requirements to pension schemes could destroy not only defined benefit schemes but any occupational pension provision, whether defined benefit or defined contribution.

PwC believes most companies would look to level down to minimum auto-enrolment requirements, to avoid the capital burdens, which would go with supporting workplace pension schemes under any likely new regime.

Joanne Segars, chief executive of the NAPF, said: “The overall objective to make European pensions more secure is one which we support. But the introduction of Solvency II type rules will have the opposite effect.

“Faced with extra funding demands, many employers will revisit their pension arrangements. And what we are likely to see is the closure of more final salary pensions.

“During these difficult economic times, Europe should focus on fostering growth and job creation. Solvency II type rules would not only put additional pressure on companies that are struggling for survival, but would also force them to divert money away from investment and new jobs.

“The UK pension system already provides a strong system of member protection through the employer covenant, the work of the Pensions Regulator, and the safety net provided by the Pension Protection Fund. We do not need new solvency rules for pensions.

“Any European action on pensions should focus on where it can add value across EU member states. The EU should concentrate on improving outcomes for the 60% of people without access to workplace pensions and on improving governance and communications. The EU should not try to fix a problem that does not exist.”

Raj Mody, head of PwC’s pensions group, added: “While attempting to improve pension scheme security, these new rules could actually kill off occupational pension schemes altogether. The additional costs for companies would ultimately be borne by individual savers, who would see less generous pensions, whether defined benefit or defined contribution. The plans would therefore work against the initiatives the UK Government is planning to encourage long-term saving.

“We reckon the cost on UK business would be in the range of £250 billion-£500 billion. In terms of the impact on the UK economy this is like wiping out a quarter of the FTSE100.”

“Other consequences include a bigger administrative burden for businesses as they seek to prove they can stand by their schemes to face less onerous funding requirements. Even then, the extra capital burden would provide companies with greater desire to remove historic defined benefit liabilities from their balance sheets, causing a surge in pension transfer incentive exercises.”

HR Magazine

UK employees’ two billion hours of unpaid overtime could create one million jobs, says TUC

The two billion hours of unpaid overtime worked last year would be enough to create over a million extra full-time jobs, according to the TUC.

The total amount of unpaid overtime worked last year was 1,968 million hours – worth £29.2 billion to the UK economy – and equivalent to a million extra full-time jobs.

If workers who regularly put in unpaid overtime worked all their hours from the start of the year, the first day they would get paid would be Friday 24 February.

In the run-up to this date the TUC will publish information and advice for staff and their bosses to try and cut out these unpaid hours at work. The TUC will call on employers to mark Work Yours Proper Hours Day by thanking staff for the extra hours they’re putting in.

The TUC analysis of official figures shows that 5.3 million workers put in an average of 7.2 hours of unpaid overtime per week last year, worth around £5,300 a year per person.

Whilst reducing the amount of unpaid overtime would not translate precisely into extra jobs – particularly as a lot of these hours are a result of a British work culture of presenteeism – the TUC is concerned persistent and excessive hours of unpaid overtime are holding back job creation.

Some employers are forcing staff to work extremely long hours that damage their health, when taking on extra employees would be far more productive and provide much needed jobs, says the TUC.

Workers in London (26.9%) and the South East (25%) are still the most likely to work unpaid overtime. Workers in the West Midlands (up 3 per cent) and the North East (up 2.2%) have experienced the sharpest rise in the likelihood of working unpaid overtime over the last year, according to the TUC analysis.

The number of workers doing unpaid overtime has increased by more than a million since records began in 1992, when 4.2 million people regularly did unpaid overtime, to 5.3 million people in 2011. The proportion of workers doing unpaid overtime has also increased slightly, from 19.7% in 1992 to 21.1% in 2011.

TUC general secretary Brendan Barber said: “The heroic amount of extra unpaid hours put in by millions of workers make a vital – but often unsung – contribution to the UK economy.

“While many politicians and financial institutions have spectacularly failed to do their bit to help the UK economy, millions of hard-working staff clearly have and we hope employers congratulate them for their efforts on Work Your Proper Hours Day this year.

“But while many of the extra unpaid hours worked could easily be reduced by changing work practices and ending the UK’s culture of pointless presenteeism, a small number of employers are exploiting staff by regularly forcing them to do excessive amounts of extra work for no extra pay.

“This attitude is not only bad for workers’ health, it’s bad for the economy too as it reduces productivity and holds back job creation.

“No-one wants to see us to become a nation of clock-watchers. But a more sensible and grown up attitude to working time could cut out needless unpaid hours and help more people into work.”

HR Magazine

2011 in review

The WordPress.com stats helper monkeys prepared a 2011 annual report for this blog.

Here’s an excerpt:

A San Francisco cable car holds 60 people. This blog was viewed about 3,000 times in 2011. If it were a cable car, it would take about 50 trips to carry that many people.

Click here to see the complete report.

Pensions cuts: ministers are not telling truth say unions

The row over pension reform that is set to bring two million workers out on strike on Wednesday has become increasingly bitter as Britain’s top trade unionist accuses ministers of “deliberately misrepresenting” the income public sector workers will receive in retirement.

With more than 20,000 schools set to shut and disruption expected at ports, airports and hospitals, both the government and unions are involved in a desperate battle to swing public opinion behind their cases.

The unions said on Saturday night they have exposed repeated government claims that everyone on low to middle incomes would get as good, and in some cases better, pension deals under the new scheme. They said such assertions were contradicted by the government’s own pensions calculator, produced on Saturday on the official Civil Service website.

Examples fed into the calculator appear to support their claim that some people would lose out under the new scheme, even if they worked until 67.

According to these calculations, if people retired at 60 under the new scheme, which they would still be entitled to do, they could, in some cases, be at least 20% worse off than if they had done so under the existing scheme. And if they worked another seven years under the new system, the calculator shows that, even after paying substantially increased contributions, some would still be worse off than if they had been able to carry on until 67 under the existing system.

Brendan Barber, the TUC general secretary, said ministers had been selling the proposals on a false prospectus but had blown their own cover at the 11th hour through the latest version of the calculator. “They have deliberately misrepresented the generosity of their proposals,” he told theObserver.

Ministers continued to insist that union bosses were behaving irresponsibly in telling their members to come out on strike when the deal on offer was “as good as it gets” and would protect the pensions of low to middle earners.

The crux of the unions’ case is that ministers – while making clear that the official public sector retirement age will have to rise – have given the impression that the proposed deal will deliver at least as good a return to low to middle income workers as they enjoy at present.

David Cameron told the Commons on Wednesday: “What is on offer is an extremely reasonable deal: low and middle income earners getting a larger pension at retirement than they do now, all existing accrued rights being fully protected, and any worker within 10 years of retirement seeing no change in either the age they can retire or the amount they can receive.”

Deputy prime minister Nick Clegg said he was appalled at “increasingly militant” union bosses who were “wilfully misrepresenting” the government’s position. Appealing to the good sense of public sector workers he said: “The only thing I ask them to do between now and next Wednesday is to sit at their desk, flip open their laptop, get on to the government website and look at what we are actually offering and compare it to what they are being told by their union bosses.”

The new calculator appears not to back Clegg in some cases randomly selected by the Observer, however. It threw up data showing that someone aged 37 on April 1 next year, who is currently on the national average salary of £26,200 and who has accrued ten years of service, could expect under the current scheme and with normal career progression to have a pension of £16,910 if he or she retired at 60. If the worker retired at 60 under the new scheme, however, the calculator shows the figure would be only £13,538.

If the same worker worked until the age of 67 under the new scheme, paying higher contributions from this year on, he or she would still lose out, getting a pension of £19,928 under the proposed changes compared with one of £20,412 if he or she carried on working until 67 under the existing lower contribution scheme.

A spokesman for the Public and Commercial Services Union, one of 30 that have balloted for strike action, said: “Ministers continue to insist their changes will mean better pensions for those on low and middle incomes but their own figures prove they are misleading MPs, millions of state employees and the public. In many case the losses to public servants are huge.”

A spokesman for the Public and Commercial Services Union, one of 30 that have balloted for strike action said: “Ministers continue to insist their changes will mean better pensions for those on low and middle incomes, but their own figures prove they are misleading MPs, millions of state employees, and the public. In many cases the losses to public servants are huge.”

The goverment appeared on Saturday night to soften its line on the benefits to members saying that “most will see no reduction in income at retirement”. It added that “many low and middle income earners will in fact receive a larger pension at retirement.”

It also said that low earners on under £15,000 a year – 15% of the workforce – would not have to make increased contributions. Another million workers earning up to £21,000 will have their total increase limited to 1.5% over three years.

Ministers insist that pension reform is urgent because people are living longer and need to be supported for longer.

Minister for pensions Steve Webb said: “It is good news that we are living longer and we should celebrate this fact. As our society undergoes this radical change, we need to ensure that we manage the impact appropriately.

“Those aged 90 today were born in the 1920s, the decade the current state pension age was set. As the pace of life expectancy continues to increase dramatically we cannot continue to pay the state pension at an age set early in the last century.”

Observer

Government to launch £250 million vocational training fund

Businesses will be able to bid for a share of a £250 million fund for vocational training programmes in the new year, as part of a government scheme designed to bring more skills into the workforce.

The Government announced that the fund will be open to collaborative proposals from businesses of all sizes and sectors, and will allow them to invest in the training that they need.

Prime Minister David Cameron said that he hoped the fund would encourage more employers to take on apprentices and ensure that businesses have the necessary skills to boost growth.

The move follows calls for the Government to take action on youth unemploymentas the number of young people out of work topped one million yesterday.

“I know times are tough – especially for young people, who are trying to get their foot in the door and launch their career,” Cameron commented. “That is why I am determined to do all that we can to give people the very best skills, training and opportunities to succeed; and why, despite tough spending decisions, we are investing in a record number of apprenticeships.

“We are seeing an incredible take-up of these apprenticeship places. I want that to continue, which is why we are taking action to make it easier to take on apprentices, and now we are giving employers the power to take control of the training so that it best meets the skills they need.”

Government funding for the scheme in 2012/13 will be up to £50 million, with an additional £200 million available in the second year.

To be successful in their bids, employers will need to demonstrate how they will leverage private investment, support apprenticeships and raise skill levels in their sector.

Charlie Mayfield, chairman of the John Lewis Partnership and the UK Commission for Employment and Skills, which will be publishing a formal prospectus on the fund in conjunction with the Government early next year, said: “Skills are not a separate agenda but integral to growth. We have seen some progress but not enough. Too often the skills system appears to businesses as a government-led enterprise rather than one led by employers.

“We need more businesses working together with their supply chains, and sectors of localities to develop the skills they need. The best way to do this is to route funds directly to employers, placing the responsibility for how the money is spent with the employer, not the Government.”

Personnel Today