Understanding the value of a company's workforce is important for investors, and companies should improve their reporting on this and be able to link this reporting to their wider company strategy and business model, according to the Pensions and Lifetime Savings Association (PLSA).

The PLSA has produced a stewardship toolkit , Understanding the Worth of the Workforce, which provides advice on the type of information its members should request from the companies they invest in about their workforces and corporate cultures. The toolkit can be used both as a template for those of our members that invest directly, or as a benchmark against which to assess the stewardship activities of existing and prospective consultants and investment managers in this area, for those who outsource their investment and stewardship work, the PLSA said.

It recommends that pension funds encourage investee companies to use their annual reports to detail their corporate cultures and working practices in a narrative form that relates the way they manage and engage their workforce to their wider strategy. This narrative reporting needs to be backed up, the PLSA recommends, with disclosure of data on areas such as:-

• Gender diversity
• Employment type (eg full time, part time, agency)
• Staff turnover
• Accidents, injuries and workplace illnesses
• Investment in training and development
• Pay ratios (across highest, media and lowest quartiles)
• Employee engagement.

The PLSA, believes that this will give investor information to help its valuation of companies and to understand its long term sustainability.

Luke Hildyard, Policy Lead: Stewardship and Corporate Governance, PLSA said, “We are all familiar with the phrases in annual reports affirming how important employees are to corporate success. But as our report last year highlighted, too often there is too little information in those same reports about how these employees are managed, developed and valued. This toolkit has been designed to provide pension schemes and other investors with a clear and structured approach to interrogating the data already available in corporate reports and guidance on what other information to request and how to analyse it."

The toolkit is part of a wider PLSA project to enhance human capital reporting and follows an earlier discussion paper and stakeholder consultation meetings. In the next phase the PLSA said it will be arranging a series of individual meetings with its members and their key investee companies to improve reporting in this area and the engagement and development of workers at UK companies over the long-term.

The Investment Association has also identified human capital reporting as an area that investors should consider as part of their decisions about companies and enhancing corporate reporting in this area to encourage more investment formed part of its productivity action plan published in March.