Comparing Accounting for People with the Draft Regulations:

Accounting for People Taskforce:

We recommend that reports on HCM should:

  • have a strategic focus;

  • communicate clearly, fairly and unambiguously the Board’s current understanding of the links between the HCM policies and practices, its business strategy and its performance; and

  • including information on: the composition of the workforce; retention and motivation of employees; the skills and competencies necessary for business success, and training to achieve these; remuneration and fair employment practices; leadership and succession planning

  • be balanced and objective, following a process that is susceptible to review by auditors.

  • provide information in a form that enables comparison over time and uses commonly accepted definitions where available and appropriate.

We recommend that directors of companies producing OFRs, and all public and other bodies that produce OFRs or reports with similar aims, should include within them information on HCM within the organisation, or explain why it is not material.

We recommend that the Standards Board invite leading employers, co-operating as appropriate with investors, professional organizations and other relevant stakeholders, to develop guidelines on key indicators and definitions. This might best be done through the creation of a standing subgroup on HCM reporting whose membership would be appropriate to discharge the responsibilities outlined above.

We recommend that the Government consult with leading employers, investors, professional organisations and other relevant stakeholders on the introduction of a programme to aid the dissemination of best practice on HCM and HCM reporting.

We recommend that the Standards Board be charged with monitoring the extent and depth of HCM reporting in OFRs, reporting to the Industry Secretary within two years of its formation.

What the Draft Recommendations say as regards the measurement of people:

Draft Statutory Instrument 2005

Companies Act 1985 (Operating and Financial Review and Director’s Report etc.) Regulations 2005-02-03

Part 3 Operating and Financial Reviews, Schedule 7ZA, Operating and financial review: Review objective

  1. An operating and financial review must be a balanced and comprehensive analysis, consistent with the size and complexity of the business, of-

(a) the development and performance of the business of the company during the financial year,

(b) the position of the company at the end of the year,

(c) the main trends and factors underlying the development, performance and position of the business of the company during the financial year, and

(d) the main trends and factors which are likely to affect the company’s future development, performance and position,

prepared so as to assist the members of the company to assess the strategies adopted by the company and the potential for those strategies to succeed.

Other general requirements

The review must include:

  • statement of the business, objectives and strategies of the company;
  • a description of the resources available to the company;
  • a description of the principal risks and uncertainties facing the company; and
  • a description of the capital structure, the treasury policies and objectives and the liquidity of the company.

It must also include:

  • information about environmental matters (including the impact of the business of the company on the environment),

  • information about the company’s employees, and

  • information about social and community issues.

The review must, in particular, include  –

  • information about the policies of the company in each area mentioned in above, and

  • information about the extent to which those policies have been successfully implemented.

The review must include analysis using financial and, where appropriate, other key performance indicators, including information relating to environmental matters and employee matters.

“Key performance indicators” means factors by reference to which the development, performance or position of the business of the company can be measured effectively.

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