The Remuneration Committee determines the Company's policy on the remuneration of the Executive Directors and (from 1 June 2019) the Executive Committee (ExCom). The principles which underpin the Remuneration Policy for the Company are to:
- Ensure Executive Directors' rewards and incentives are directly aligned with the interests of the shareholders in order to reinforce the strategic priorities of the Group, optimise the performance of the Group and create sustained growth in shareholder value, without encouragement to take excessive undue risk.
- Provide the level of remuneration required to attract, retain and motivate Executive Directors and senior executives of an appropriate calibre.
- Ensure a proper balance of fixed and variable performance-related components, linked to short and longer term objectives.
- Reflect market competitiveness, taking account of the total value of all the benefit elements.
Our Remuneration Strategy has been designed to reflect the needs of a complex multinational organisation, which has grown both organically and by acquisition.
Remuneration for the Executive Directors is structured so that the variable pay elements (annual bonus and long-term incentives) form a significant proportion of the overall package. This provides a strong link between the remuneration paid to Executive Directors and the performance of the Group as well as providing a strong alignment of interest between the Executive Directors and shareholders.
For the purposes of section 226D-(6)(b) of the Companies Act 2006, this policy took effect from the date of the 2017 AGM, which was held on 21 September 2017.
Current policy table for Executive Directors
|Purpose and link to short and long-term strategic objectives||Operation (including framework to assess performance)||Maximum opportunity|
|Attract, retain and reward high calibre Executive Directors||The Remuneration Committee reviews salaries for Executive Directors and also the Executive Committee (ExCom) from 1 June 2019 annually unless responsibilities change.|
Pay reviews take into account Group and personal performance and externally benchmarked market data for companies operating in IT services, management consulting and relevant high-tech sectors, which, although not directly comparable, provide an indicative range.
In setting appropriate salary levels the Committee takes into account pay and employment conditions of employees elsewhere in the Group, alongside the impact of any increase to base salaries on the total remuneration package.
Any changes are effective from 1 June each year.
|Details of current Executive Director salaries are set out in the Annual Report on Remuneration.|
Salary increases are normally in line with those for other employees but also take account of other factors such as changes to responsibility and the complexity of the role.
|Attract, retain and reward high calibre Executive Directors||Benefits in kind include the provision of a car or car allowance, payment of private fuel, car insurance, private medical insurance, life assurance and permanent health insurance.|
Executive Directors may be invited to participate in the Sharesave Scheme approved by HMRC.
SAYE Sharesave Scheme subject to HMRC approved limits.
|To provide a competitive benefit, which attracts high calibre executives and which allows flexible retirement planning to suit individual needs||Executive Directors are entitled to a company pension contribution, which is paid into the Group defined contribution personal pension scheme.|
They can also opt to have the same level of contribution made as a percentage of base salary.
|10% of base salary into the Group Scheme, providing they make a contribution of not less than 5% of base salary, or a base salary supplement of 10% of base salary.|
|Drive and reward sustainable business performance||Based on a range of stretching targets measured over one year. This might include, but not exclusively, profit measures and other strategic objectives such as cash management, brand development, customer satisfaction and retention, business unit sales growth and employee engagement. Performance below the minimum performance target results in no bonus. No more than 20% of the maximum opportunity is paid for achievement of the threshold performance targets. Payments rise from the threshold payment to 100% of the maximum opportunity for levels of performance between the threshold and maximum targets. The rate of the rise and the various payment targets are determined annually by the Committee.|
The Committee has discretion to reduce the formulaic bonus outcome if individual performance is determined to be unsatisfactory or if the individual is the subject of disciplinary action.
35% of any bonus payment is deferred into nominal cost share options which vest after a two-year period. Dividend equivalents are paid on vesting share options. Malus and clawback provisions are in place for both cash and deferred elements.
|Chief Executive Officer 100% of base salary.|
Chief Financial Officer 100% of base salary.
|Long Term Incentive Plan|
|To drive long-term performance in line with Group strategy and incentivise through share ownership||Awards have a performance period of three years.|
The level of vesting is determined by measures appropriate to the strategic priorities of the business. At least half of any award will be subject to financial performance measures. Measures might include, but not exclusively, EPS, cash flow and relative TSR metrics.
The targets will represent a maximum of 60% of total potential for EPS growth, 30% for the achievement of cash flow targets and 10% for the achievement of relative TSR targets.
The Remuneration Committee has the discretion to determine the number of measures to be used.
Performance below the threshold target results in no vesting. For performance between the threshold target and maximum performance target, vesting starts at 20% and rises to 100% of the shares vesting.
Any awards granted under this policy to Executive Directors which vest and are exercised after the completion of the three-year performance period must be held for a further two years after vesting, even if the Director has met the 200% shareholding guideline.
Should a change in control of the Group occur, crystallisation of any LTIP awards is within the discretion of the Remuneration Committee.
Malus and clawback provisions are in place.
|Award over shares with a face value at grant of:|
100% of salary p.a. for the Chief Executive Officer.
100% of salary p.a. for the Chief Financial Officer.
|Executive Director Shareholding guidelineideline|
|To align the interests of Executive Directors with the interests of all of the Company's shareholders||The Executive Directors are expected to build and retain a shareholding in the Group at least equivalent to 200% of base salary. Executives will be required to retain all vested deferred bonus shares and LTIP shares released from the holding period until they have attained the minimum shareholding guideline and even then they may only sell when they have held vested LTIP shares for a minimum period of two years.|
For the avoidance of doubt, Executive Directors are permitted to sell sufficient shares in order to meet any tax obligation arising from vesting shares.
Choice of performance measures and target setting
For both the annual bonus and LTIPs, the objective of our Policy is to choose performance measures which help drive and reward the achievement of our strategy and which also provide alignment between executives and shareholders. The Committee reviews metrics annually to ensure they remain appropriate and reflect the future strategic direction of the Group.
Targets for each performance measure are set by the Committee with reference to internal plans and external expectations. Performance is generally measured so that incentive payouts increase pro rata for levels of performance in between the threshold and maximum performance targets.
With regard to the annual bonus, the Remuneration Committee believes that a simple and transparent scheme with sufficiently stretching targets and an element of bonus deferral prevents short-term decisions being made and ensures that the executive is focused on the delivery of sustainable business performance.
With regard to the LTIP, the Committee believes in setting demanding objectives, which reward steady, progressive growth, in order to incentivise and encourage long-term growth and enhance shareholder value.
Performance measures and targets are disclosed in the Annual Report on Remuneration. In cases where targets are commercially sensitive, for example annual profit targets for the annual bonus, they will be disclosed retrospectively in the year in which the bonus is paid.
Differences in pay policy for employees and Executive Directors
The principles behind the Remuneration Policy for Executive Directors are cascaded down through the Group and its aims are to attract and retain the best staff and to focus their remuneration on the delivery of long-term sustainable growth by using a mix of salary, benefits, bonus and longer-term incentives.
As a result, no element of Executive Director Remuneration Policy is operated exclusively for Executive Directors:
- The annual performance-related pay scheme for Executive Directors is largely the same as that of the Executive Committee and other senior managers within the business and all are aligned with similar business objectives.
- Participation in the LTIP is extended to the Executive Committee and other senior managers where possible.
- The pension scheme is operated for all permanent employees.
The main difference between pay for Executive Directors and employees is that for Executive Directors, the variable element of total remuneration is much greater while the total remuneration opportunity is also higher to reflect the increased responsibility of the role.
Executive shareholding guidelines
The Committee considers that Executive Directors should retain a personal holding of shares in the Company, so as to align their interests with the interests of shareholders.
In any event, 35% of the value achieved as part of the annual bonus scheme will be deferred into nominal cost share options, to be held for a period of no less than two years and share options vesting under the LTIP scheme, if exercised, are to be held for a minimum of two years after the vesting date.
Non-Executive Director policy table
|Purpose and link to strategy||Operation||Maximum opportunity|
|Attract, reward and retain experienced Non-Executive Directors||Fees for the Non-Executive Directors are determined by the Board within the limits set by the Articles of Association and are based on information on fees paid in similar companies, taking into account the experience of the individuals and the relative time commitments involved.|
There will be separate disclosures of fees paid for Chairing the Audit and Remuneration Committees and for acting as Senior Independent Director.
Fees for the Non-Executive Directors are reviewed annually.
Any reasonable business-related expenses (including tax thereon) can be reimbursed if determined to be a taxable benefit.
|Current fee levels are set out in the Annual Report on Remuneration.|
Overall fee limit will be within the current £300,000 limit set out in the Company's Articles of Association, approved on 21 September 2010, which is subject to increase on 21 September each year by the same percentage increase as the percentage increase in the General Index of Retail Prices for all items (or such other comparable index as may be substituted for it from time to time before such anniversary) in the 12 months immediately preceding such date.
Approach to recruitment
The principle applied in the recruitment of a new Executive Director is for the remuneration package to be set in accordance with the terms of the approved Remuneration Policy for existing Executive Directors in force at the time of appointment. Further details of this Policy for each element of remuneration is set out below.
Salaries for new hires, including internal promotions, will be set to reflect their skills and experience, the Company's intended pay positioning and the market rate for the applicable role.
Where it is appropriate to offer a salary initially below median levels, the Committee will have the discretion to allow phased salary increases over a period of time for newly appointed Directors, even though this may involve increases in excess of the rate for the wider workforce and inflation.
Benefits will be provided in line with those offered to other Executive Directors, taking account of local market practice, with relocation expenses or arrangements provided if necessary. Tax equalisation may also be considered if an Executive Director is adversely affected by taxation due to their employment with the Company. The Company may also pay legal fees and other costs incurred by the individual. These would all be disclosed.
The aggregate ongoing incentive opportunity offered to new recruits will be no higher than that offered under the annual bonus plan and the LTIP to the existing Executive Directors. Different performance measures and targets may be set initially for the annual bonus plan, taking into account the responsibilities of the individual and the point in the financial year at which they join.
Sign-on bonuses are not generally offered by the Group but at Board level, the Committee may offer additional cash and/or share-based 'buyout' awards when it considers these to be in the best interests of the Company and, therefore, shareholders, including awards made under Listing Rule 9.4.2 R. Any such 'buyout' payments would be based solely on remuneration lost when leaving the former employer and would reflect the delivery mechanism such as cash, shares, options, time horizons and performance requirements attaching to that remuneration.
Transitional arrangements for internal appointments to the Board
In the case of an internal appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms on grant, adjusted as relevant to take into account the appointment. In addition, any other ongoing remuneration obligations existing prior to appointment may continue, provided that they are put to shareholders for approval at the first AGM following their appointment.
Policy on payment for loss of office
Payments on termination for Executive Directors are restricted to the value of salary and contractual benefits for the duration of the notice period. It is the policy of the Remuneration Committee to seek to mitigate termination payments and pay what is due and fair. There are no predetermined special provisions for Executive Directors with regard to compensation in the event of loss of office. The Company may also pay an amount considered to be reasonable by the Committee where loss of office is due to redundancy or in respect of fees for legal advice for the outgoing Director.
Elements of variable remuneration would be treated as follows:
The treatment of annual bonus payments upon cessation of employment is determined on a case-by-case basis. When the Committee determines that the payment of an annual bonus is appropriate, the annual bonus payment is typically:
- Prorated for the period of time served from the start of the financial year to the date of termination and not for any period in lieu of notice or garden leave.
- Subject to the normal bonus targets, tested at the end of the year, and would take into account performance over the notice period.
- Subject to deferral of 35% of the value.
The Committee also has the discretion to determine whether any nominal cost share options from previous deferral of annual bonus payments will vest at the normal vesting date or earlier on leaving or whether they lapse. If the Committee exercises this discretion, it can also determine if the vesting should be prorated to reflect time served since the beginning of the deferral date. The same discretionary principle would apply to the payment of dividend equivalents on any shares that have been deferred, but not yet vested. This too would be prorated to reflect tenure.
Long Term Incentive Plan
Under the LTIP, unvested awards will normally lapse upon cessation of employment. However, in line with the plan rules, the Committee has discretion to allow awards to vest at the normal vesting date, or earlier. If the Committee exercises this discretion, awards are normally prorated to reflect time served since the date of grant and based on the achievement of the performance criteria. The holding period detailed above will apply to such incentives.
All Employee Share Schemes
The Executive Directors, where eligible for participation in all employee share schemes, participate on the same basis as for other employees.
Approach to service contracts and letters of appointment
The Committee's policy is to offer service contracts for Executive Directors with notice periods of between six and 12 months exercisable by either party. In addition, the Executive Directors are subject to a non-compete clause from the date of termination, where enforceable.
All Non-Executive Directors' appointments are terminable on at least three months' notice on either side.
The Executive Directors and Non-Executive Directors offer themselves for re-election at the AGM every year.
Illustration of remuneration scenarios
The chart below details the hypothetical composition of each Executive Director's remuneration package and how it could vary at different levels of performance under the policy set out above.
Note that the charts are indicative, as share price movement has been excluded. Assumptions made for each scenario are as follows.
- Minimum. Fixed remuneration only: salary, benefits and pension. Salary based on 2019/20 salary and benefits based on 2018/19 disclosed benefit amounts.
- Target. Fixed remuneration plus minimum annual bonus opportunity of £66,977 for the Chief Executive Officer and £42,281 for the Chief Financial Officer, which is equivalent to 15% of salary for both the Chief Executive Officer and Chief Financial Officer, plus 20% vesting of the maximum award under the Long Term Incentive Plan.
- Maximum. Fixed remuneration plus maximum annual bonus opportunity, £446,516 for the Chief Executive Officer and £281,875 for the Chief Financial Officer, equivalent to 100% of salary for both the Chief Executive Officer and Chief Financial Officer, as well as 100% vesting of the maximum award under the Long Term Incentive Plan, being 100% of salary for both Executives.
Statement of consideration of employment conditions elsewhere in the Group
The Remuneration Committee does not consult directly with employees when determining Remuneration Policy for Executive Directors. However, as stated above, the annual bonus and LTIP are operated for other employees to ensure alignment of objectives across the Group and the terms of the pension scheme (save for the contribution entitlements) are the same for all permanent employees. In addition, the Committee compares information on general pay levels and policies across the Group when setting Executive Director pay.
How shareholder views are taken into account
The Remuneration Committee considers shareholder feedback received on the Directors' Remuneration Report each year and guidance from shareholder representative bodies more generally. Shareholders' views are key inputs when shaping remuneration policy. When any material changes are proposed to the Remuneration Policy, the Remuneration Committee Chairman will inform major shareholders in advance and will generally offer a meeting to discuss these.
Key areas of discretion in the Remuneration Policy
The Committee operates the Group's variable incentive plans according to their respective rules and in accordance with HMRC rules where relevant. To ensure the efficient administration of these plans, the Committee will apply certain operational discretions. These discretions are implicit in the policy stated above, but we have listed them for clarity. These include, but are not limited to:
- Whether annual bonus is paid to Executives once notice has been served.
- Discretion in exceptional circumstances to amend previously set incentive targets or to adjust the proposed payout to ensure a fair and appropriate outcome.
- Certain decisions relating to the LTIP awards for which the Committee has discretion as set out in the rules of the relevant share plans which have been approved by shareholders.
- The decisions on exercise of clawback rights.
For the avoidance of doubt, in approving the Remuneration Policy in 2017, authority was given to the Company to honour any commitments entered into with current or former Directors before the current legislation on remuneration policies came into force or before an individual became a Director, such as the payment of outstanding incentive awards, even where it is not consistent with the policy prevailing at the time such commitment is fulfilled.
Details of any payments to former Directors will be set out in the Annual Report on Remuneration as they arise.
External directorships for Executive Directors
Executive Directors may accept one external Non-Executive Directorship with the prior agreement of the Board, provided it does not conflict with the Group's interests and the time commitment does not impact upon the Executive Director's ability to perform their primary duty. The Executive Directors may retain the fee from external directorships.