Reward Autumn Update 2026

Specifically in relation to the DRR, the proposals include:

• retaining (i) the single-figure table, (ii) the statement from the remuneration committee chair which summarises the key decisions or proposals on executive remuneration (including the use of discretion), (iii) the disclosure of performance measures attaching to pay awards in the previous year, and (iv) the Total Shareholder Return (TSR) performance graph, all of which are considered to be investor-critical;

• removing CEO-employee pay ratio reporting;

• removing the requirement to include information on how the directors’ remuneration policy will be implemented for the following year (as shareholders have already approved this) or requiring an outline only where there has been a material update (for example when an executive director leaves or joins the company);

• removing or refining the requirement to report on directors’ accumulated shareholding interests; and 

• removing the reporting of information where there is overlap with provisions of the UK Corporate Governance Code, including in relation to how the remuneration committee engages with shareholders and employees and on the disclosure of malus and clawback policies.

These proposals are intended to reduce the length and complexity of the DRR while continuing to require the disclosure of key executive remuneration information for the benefit of shareholders and other stakeholders.

By way of reminder, unfair dismissal can only be claimed by employees. A claim for unfair dismissal may arise where an employer terminates an employee’s employment without a potentially fair reason. There are five potentially fair reasons on which an employer can rely when seeking to show that it dismissed an employee fairly: conduct, capability, redundancy, illegality, and some other substantial reason. Even where the employer has a fair reason for the dismissal, the employer must also have acted reasonably in treating that reason as sufficient for the dismissal.

In practice, a failure to follow procedural requirements may be a sticking point, as generally an employer will wish to swiftly exit a senior executive through a negotiated departure rather than following a legally compliant process.

Following the removal of the cap, it will be significantly more beneficial to a senior executive to seek to bring an unfair dismissal claim. In addition, where there is a process failure, an employment tribunal will be able to apply an ACAS uplift of up to 25% on total compensation for a failure to comply with the ACAS Code of Practice on disciplinary and grievance procedures.

The employment tribunal has wide discretion to award compensation for any financial losses which flow from the dismissal. Therefore, compensation for share-plan losses may be awarded where these losses are caused by the dismissal.

In the 2005 Employment Appeal Tribunal case of Selective Beauty UK Ltd v Hayes, relating to compensation for the loss of share options following an unfair dismissal, it was held that when assessing a future loss of opportunity, the tribunal should determine the likelihood of an eventuality occurring in percentage terms. In this case this required a determination of (i) whether the grantor of the share options would IPO and (ii) if so, when, (iii) whether the appellant would have exercised their option to buy the shares, and (iv) whether they would have remained in employment at the time of the IPO.

Where a senior executive is holding shares under a private company management incentive plan and is unfairly dismissed, it is likely that consideration would need to be given to the proximity to an exit, hypothetical exit values and the likelihood of the executive being in role at the time of an exit, but for the dismissal, which may require expert valuation and corporate finance advisory input. In the case of share awards subject to a plc LTIP, hypothetical share values, the likelihood of performance conditions being met and the likelihood of the executive being in role at the time of vesting will be relevant considerations.

When assessing the size of an unfair dismissal award, a tribunal should also consider whether the employee contributed to their dismissal and the steps the former employee has taken to mitigate their loss. If a dismissal is found to be procedurally unfair, the tribunal can apply a percentage reduction to the award to reflect the likelihood that a dismissal would have occurred even if a fair process were followed.

It is usual to include a contractual exclusion clause in share plan rules to limit compensation payable to former employees following termination of employment and protect the employer to the extent legally permissible referred to as a “Micklefield clause”. However, these clauses can generally not be relied upon in an unfair dismissal.

There are a number of steps that employers can take on a protective basis both from a documentation and process perspective. Please get in touch with your usual contact in the team to discuss.

Phase 1 is “fixing the system” and focuses on improving the current system by streamlining procedures and strengthening transparency and enforcement.

Key proposals include:

• a statutory requirement for employers to publish information about pay and conditions in job adverts, or where there is no job advert, in writing to a candidate in advance of an interview;
• the reinstatement of the use of a standard questionnaire in pay discrimination disputes which was repealed in 2013 to enable employees to obtain information about components of pay (such as allowances or bonuses) that they may not have had access to;
• new enforcement powers for Employment Tribunals, including mandating equal pay audits following successful discrimination claims and mandating the implementation of non‑discriminatory job evaluation schemes; and
• establishing an Equal Pay Regulatory and Enforcement Unit which would have powers to compel employers to hand over pay data and evidence before a formal investigation starts, order companies to run equal pay audits or use non-discriminatory job evaluation schemes as part of an investigation process and track compliance by requiring organisations to respond to inquiry recommendations and show proof of progress to improve accountability of employers and transparency for employees.

Phase 2 is “making the right to equal pay effective for all”. The Government’s objective is to ensure that pay discrimination on the basis of race and disability is taken as seriously as sex and to require employers to take all reasonable steps to uphold pay equality in their contractual arrangements.

Key proposals include:

• giving tribunals powers to modify discriminatory contractual terms in race and disability pay cases;
• widening equal pay audit and job evaluation obligations to race and disability;
• enabling equal value type claims for race and disability; and
• creating a new duty on all parties in outsourcing arrangements regardless of the complexity of the chain to take all reasonable steps to ensure pay equality, which would be enforced by the new Equal Pay Regulatory and Enforcement Unit rather than through individual claims.

These are wide-reaching proposals and where measures are taken forward, the consultation recognises that employers and employees should have the time and resources to prepare for the changes.

AIM companies will no longer need to adopt or comply or explain against a recognised corporate governance code. Instead, AIM Rule 26 specifies five key areas for disclosure to support investor understanding of the approach the company takes to corporate governance, which are as follows:

• board composition: the name of its directors and brief biographical details of each, as would normally be included in an admission document, and details of those who are independent;
• director responsibility: the role and responsibilities and functions of each director for the delivery of the AIM company’s strategy, commercial objectives and the effective management of its risks;
• remuneration and performance: details of the structure of executive and non-executive director remuneration, i.e. how this is aligned with individual and AIM company performance and how it is assessed; 
• risk and controls framework: details of corporate governance committees and their role and responsibilities; and
• investor relations: the AIM company’s approach to AIM shareholder engagement.

In feedback relating to the new rules, the Exchange explains that the changes seek to ensure that AIM companies have the flexibility to adopt governance arrangements that are appropriate to their size, stage of development and circumstances, enabling them to use a recognised code as a framework for those arrangements.

The Exchange notes that based on its engagement with the market, consistent disclosure was considered an important feature of a company’s corporate governance. Accordingly, the items of disclosure required under the new AIM Rule 26 are based on feedback from investors as to what they consider is important.

Although there is no longer a requirement to comply or explain against a recognised code, in keeping with current practice, we expect that most companies will continue to follow the QCA Code or the UK Corporate Governance Code or (in a minority of cases) where a company is incorporated overseas, a local equivalent.

In relation to related party transactions with directors, new guidance on what constitutes standard remuneration has been included in the updated rules. The test for whether remuneration is standard is whether the remuneration is part of the directors' existing contractual terms and conditions of service and/or whether the remuneration (whether specific or as part of a scheme) has been approved by shareholders in a general meeting. Any remuneration that falls outside of this scope will be considered non-standard remuneration. Non-standard remuneration will be a related party transaction subject to the usual class tests.

Under the new AIM rules, nomads will no longer be required to give a fair and reasonable opinion on non-standard director remuneration where they are satisfied that the contractual terms provide reasonable commercial protections for the company. Contractual protections would include terms such as good leaver/bad leaver provisions, provisions for clawback, conditions/deferral provisions and performance measures and those terms should be disclosed. 

Where there is uncertainty on whether non-standard remuneration provides reasonable commercial protections, the AIM company should seek AIM shareholder approval.

Special voting shares will be permitted on admission to AIM, enabling founders, directors and pre-IPO investors to retain control. There are no time restrictions or sunset provisions for special voting shares in the new rules.

Under Rule 7 of the AIM rules, new businesses which have not been independent and earning revenue for at least the two financial years before admission, must ensure that all persons who are related parties and/or applicable employees both immediately prior to and immediately following the date of admission must agree to a 12-month lock-up with effect from the date of admission. This rule has been relaxed for:

• transfers between spouses or into a pension plan;
• intra-group transfers; and 
• in the event of financial hardship.

The Supreme Court handed down its decision in HMRC v BlueCrest Capital Management (UK) LLP, dismissing the taxpayer's appeal and providing the fullest judicial guidance to date on the salaried member rules that determine whether an individual member of an LLP is taxed as an employee or as a partner, see our article. 

In our Employment Tax Updates, we cover key practical issues for employers which are reported in HMRC’s monthly Agent Updates.

• Employment Tax update - June 2026
• Employment Tax update - August 2026

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