Companies must do more to disclose employment practices, report says

A Pensions and Lifetime Savings Association survey of its members carried out in 2016 found that 100 per cent of respondents saw the workforce stability of a company they are investing in as important. This refers to how secure the current workforce is, and how it might change over time.

If you invest in more workforce development, the company’s going to do better in terms of productivity

Robert Branagh, PMI

However, only 18 per cent of FTSE 100 companies are reporting staff turnover, according to new research, carried out by the PLSA and Lancaster University Management School.

Pension schemes also deem a company’s focus on employee skills and capabilities important.

Although just over half of companies provide a meaningful acknowledgement of their approach to the skills and capabilities of their workforce, only 21 per cent of firms report data on investment in training and development.

With regard to general reporting, while only 43 per cent of businesses report how employees added value to the company strategy, 91 per cent discussed the workforce in relation to risk management.

Why workforce information matters for trustees

The report, which highlighted that schemes need information about the employment models and working practices of the companies they invest in, stressed that “the onus is both on companies to provide better information and on investors to ask for it”.

Luke Hildyard, the PLSA’s policy lead for stewardship and corporate governance, said: “A company’s workforce, the composition, stability, skills, capabilities, engagement and motivation levels of the workforce, are going to be a critical determinant of its long-term performance.”

It is important therefore for pension funds, as long-term investors, to have access to information about these factors when investing in a company.

“There’s also a lot of regulatory and stakeholder interest in the roles that pension funds, as owners of companies, are playing in meeting some of the big economic challenges facing the UK around productivity and precarious working,” Hildyard said.

Quality of work and the number of people in low-paid jobs were among the concerns voiced in Matthew Taylor's review of modern working practices, published in July.

The review highlighted how important it is to individuals and the health of the UK economy “that everyone feels they have realistically attainable ways to strengthen their future work prospects”.

Will positive examples inspire others?

Despite the low percentage of companies providing meaningful commentary on the stability of their workforce, Pensions Management Institute president Robert Branagh noted the positive points raised by the PLSA research.

“Even though there are some negative percentages… there are some really good themes that [companies] could take from this,” he said, adding the research acted as a timely reminder that companies which follow good practice do exist.

The PLSA report highlights energy firm SSE as the only FTSE 100 company that discloses material details of training arrangements for graduates and apprentices.

It found that the same company did a separate report on “human capital” which quantifies its investment in its workers, and calculated the value that this investment generates for the company, the worker and wider society. “Some of that stuff is really fantastic,” Branagh said.

He stressed the importance of skills and capabilities: “If you invest in more workforce development and sharing of that information around the investment in your workforce development, not only are individual workers going to do better… but obviously, the company’s going to do better in terms of productivity.”

Data are difficult to compare

Daniela Silcock, head of policy research at the Pensions Policy Institute, noted there is pressure mounting on pension schemes “to make a lot of disclosures themselves”.

But the different measures used by companies making direct disclosures on their workforce investment could make comparison difficult.

“It would actually be quite difficult to put this burden on employers and companies, without there having to be a third party who coordinated how the information was collected,” she said.