10 Min Webinar: New Statutory Requirement to Report on Employee Engagement – The What, Who and How

UK companies became subject to new statutory reporting requirements at the beginning of 2019 under the Companies (Miscellaneous Reporting) Regulations 2018, but it’s only from 1 January 2020 that we’ll start to the impact of these on company reporting.

One of the new requirements is to report on how the company has engaged with employees and considered their interests in decision making. With an estimated 9,900 UK businesses becoming subject to the new employee engagement statement, many UK business leaders remain unaware of their new obligations. Here we outline what’s happening, why, who it impacts and how you can deal with the changes.

The What

The employee engagement statement must appear in the directors’ report and detail how in the previous financial year:

1. The company has engaged with employees, including how they communicate information around business performance;
2. The directors have taken account of the interests of their employees in taking business decisions; and
3. What impact has this had, including on principal decisions taken by the company.

The Why

In 2016, the government published a green paper on corporate governance reform, exploring three specific aspects: executive pay; strengthening the employee, customer and supplier voice; and corporate governance in large privately-held businesses.

Following this consultation the government published its response in summer 2017, outlining the actions which are intended to “improve corporate governance and give workers and investors a stronger voice.”  These build on the government strategy of strengthening corporate governance requirements in light of recent corporate failures, with the aim making “sure our largest companies are more transparent and accountable to their employees and shareholders“.

The Who

The new obligation applies to any UK incorporated company (whether quoted or not) that has more than 250 employees and that satisfies one of the following tests:

• Annual turnover of more than £36 million; or
• Balance sheet total of more than £18 million.

It’s important to note that when considering the number of employees, you must take account of part-time, fixed-term and zero contract workers. If the company is a parent company, it is the number of employees in the group that is relevant.

Importantly, the obligation rests with directors to provide accurate reports, and it’s a criminal offence for them personally if they deliberately fail to comply.

The How

As we enter the first reporting season (from 1 January 2020) where employee engagement statements are required, it’s imperative that HR and executive teams understand how to meet the requirements of the new legislation and use this as an opportunity to facilitate a step change in the culture of their business.

At The Happiness Index we help companies create a thriving culture using 3 key steps:

1. Ensure you listen to your employees (collecting both quantitative and qualitative data)
   • This is quick and easy to set up in weeks using a tool like The Happiness Index, and we’re firm believers that this needs to be an ongoing dialogue rather than a one-off annual event.

2. Interrogate your data to gain insight and understand the sentiment behind what your people are saying

• The Happiness Index use a combination of data science and Artificial Intelligence to provide full visibility on the key drivers impacting cultural health, employee engagement and productivity.

3. Look beyond one data set

• Correlate your people engagement data with other key performance indicators e.g. your customer satisfaction and productivity data to understand your wider organisational drivers.

HRD Connect