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FRC calls for improved workforce reporting

Reporting on employment-related issues must improve to meet investor needs and reflect the workforce, according to a report from the Financial Reporting Council (FRC)’s Financial Reporting Lab

Working conditions, changing contractual arrangements and automation have reportedly become workforce-related investor focuses, and the Lab’s report reveals investors’ overwhelming support for clearer company disclosures on these issues.

It states that as investors try to understand which companies are able to build and maintain a productive workforce they are interested in how a company intends to develop its workforce in a sustainable long-term fashion.

As a result, investors are reportedly seeking greater insight into how boards consider and assess the topic of the workforce, what it is and how it contributes to the success of the business model, the risks and opportunities related to the workforce, and how the company measures the contribution of employees.

A summary of the report has been published by the Lab covering questions companies should ask themselves about their corporate reporting.

Phil Fitz-Gerald, director of the Financial Reporting Lab, said: “As the nature of the workforce has evolved so too have the opportunities and risks for investors, who are rightly demanding improved reporting on workforce matters such as what the workforce is, retention and turnover, and workforce engagement.

Reporting on culture should be informative and provide investors with a clearer insight into risks, setting out how the workforce contributes to value and how that value is maintained,” he added.

In October 2019 the UK Corporate Governance Code set out that companies need to describe engagement with employees in their annual report, as well as the board’s regard for employee interests and the effect on principle decisions during the year, by January 2020.

The Code also requires companies to ‘assess and monitor culture’, and ‘seek assurance that management has taken corrective action’ when it is not satisfied that policy practices or behaviour throughout the business are aligned with the company’s purpose, values and strategy.