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Remuneration Committee



Overall approach to remuneration

At Premier Foods, the remuneration policy is designed to attract, retain and motivate a high calibre management team. Focus is placed on driving exceptional performance and creating shareholder value in a sustainable way, as well as aligning the interests of the executive directors with key stakeholders.

The Committee follows the following broad principles when considering the design, implementation and assessment of remuneration in line with the recommendations set out in Provision 40 of the 2018 UK Corporate Governance Code:

Clarity – remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce

The Company’s remuneration policy is designed to support the delivery of the Group’s strategic objectives which are aligned with the long-term interests of both shareholders and key stakeholders, including employees. The Committee is committed to being transparent in respect of the elements of remuneration, quantum, the rationale for targets set and performance outcomes. The Committee engages with shareholders and is keen to understand their views and priorities. Recent engagement has included discussion to understand shareholder views on the continued strategic focus on Net debt and whether it remained an appropriate bonus goal following the continued deleveraging of the business. The Committee concluded that it was appropriate to use Net debt as a measure for 2021/22, but consideration would be given to introducing an alternative financial measure for subsequent years.

Simplicity – remuneration structures should avoid complexity and their rationale and operation should be easy to understand

The Committee believes the current arrangements for executive directors to be simple and these consist of three elements:

  • A fixed element that comprises salary, pension and taxable benefits.
  • A variable element that is subject to performance conditions and comprises:
    • short-term goals via the annual bonus plan; and
    • long-term goals via the Long-Term Incentive Plan.

The Committee has made a number of changes to remuneration policy over the last few years to remove complexity and reflect market practice and considers that the current arrangements are clear, easy to understand and provide an appropriate balance between fixed and variable remuneration.

Risk – remuneration arrangements should ensure reputational and other risks from excessive rewards, and behavioural risks that can arise from target-based incentive plans, are identified and mitigated

Targets are reviewed to ensure they reflect the overall risk appetite set by the Board and do not encourage inappropriate behaviours or excessive risk taking.

Mitigation is provided through the recovery provisions that apply to both the annual bonus and LTIP. The Committee updated the malus and clawback provisions in line with current best practice expectations in the 2019/20 financial year. This included introducing additional trigger events in the event of corporate failure and/or material damage to the Company’s business or reputation. The LTIP rules have also been updated to include a discretion to override the vesting result in exceptional circumstances.

In addition, holding periods are in place for awards under the Deferred Bonus Plan and LTIP.

Predictability – the range of possible values of rewards to individual directors and any other limits or discretions should be identified and explained at the time of approving the policy

The Committee assesses the potential outcome of future reward by reference to potential pay-outs that can be received at a range of outcomes (minimum, mid-point and maximum) as set out in the Remuneration Policy approved by shareholders at the 2020 AGM. In addition, the effect of future share price growth under the LTIP is also considered based on a 50% increase in share price over the period.

Proportionality – the link between individual awards, the delivery of strategy and the long-term performance of the company should be clear. Outcomes should not reward poor performance

The Committee seeks to ensure that targets for the annual bonus and long-term incentives are aligned with the Group’s strategy and the long-term sustainable development of the business.

The focus of our remuneration strategy is on rewarding performance – the majority of executive remuneration (approximately 70% at maximum) is variable and only payable if demanding performance targets are met. The majority of variable pay is payable in the form of shares.

When setting targets for variable elements of pay, the Committee carefully considers the targets to minimise the risk of excessive reward.

When assessing performance against the annual bonus and LTIP, the Committee also considers:

  • the overall performance of the business;
  • the experience of key stakeholders including shareholders, employees, suppliers and customers;
  • the quality of earnings when assessing the achievement of financial targets; and
  • the market in which the Company operates.

The Committee retains discretion to override formulaic outcomes produced by the performance conditions where, in the Committee’s view, they do not reflect the performance of the business over the period, individual performance or where events happen that cause the Committee to determine that the conditions are unable to fulfil their original intended role.

Alignment to culture – incentive schemes should drive behaviours consistent with company purpose, values and strategy

As part of the preparation of the 2020 Remuneration Policy, the Committee reviewed the overall design of the Group remuneration strategy and believes that it is consistent with the Company’s purpose, values and strategy and is aligned with the Group’s culture. When setting the annual goals for the annual bonus and LTIP award, the Committee considers a range of different potential measures in order to select those that it believes are most likely to drive the successful delivery of the Group strategy and are aligned with shareholders’ interests to deliver earnings growth and improved shareholder value in the medium-term.

Summary of the Directors’ Remuneration Policy

The current Directors’ Remuneration Policy was approved by shareholders at the AGM on 12 August 2020 (with 96.65% of shares voted being in favour). The following table presents a summary of the key elements of the current Directors’ Remuneration Policy and how it will be implemented in 2021/22. The full policy is available by following the link provided below.

Current elements of remuneration and operation How we plan to operate the Policy in 2021/22
Base salary
Set at levels to attract and retain talented individuals with reference to the size and complexity of the business, the specific experience, skills and responsibilities of the individual, and the market rates for companies of comparable size and complexity and internal Company relativities. Normally reviewed annually (currently with effect from 1 July) in conjunction with those of the wider workforce.
As of 3 April 2021, salaries are as follows:
• CEO – £500,000
• CFO – £310,000

As set out in last year’s Remuneration Report, both CEO and CFO were appointed on salaries significantly below their predecessors and the Committee aims to increase their salaries over the two years from their appointment to a level at, or near, the FTSE 250 lower quartile.
Following an increase during the year, the CEO’s salary is now positioned at around the lower quartile of the FTSE 250. The CFO’s salary remains below the FTSE 250 lower quartile and therefore an above-average increase is anticipated in 2021/22, subject to performance.
Benefits include: cash allowance in lieu of company car; fully expensed fuel; private health insurance; life insurance; permanent incapacity benefit; professional memberships; and other ancillary benefits, including relocation expenses (as required).
No change.
Pension contributions or a salary supplement of 7.5% of base pay up to an earnings cap, in line with that offered to the majority of the workforce.
No change.
Annual bonus
Designed to incentivise delivery of annual financial and operational goals and directly linked to delivery of the Group’s strategy.

Maximum opportunity:
• CEO – 125% of salary
• CFO – 100% of salary

One-third of earned bonus is deferred into shares for three years. Awards are subject to malus and clawback provisions.
Maximum opportunity (no change):
• CEO – 125% of salary
• CFO – 100% of salary

Awards will be subject to the following performance measures:
• Trading profit (50% weighting);
• Net debt (20% weighting);
• Strategic objectives (20% weighting for the CEO and 15% for the CFO);
• Operational objectives (10% weighting for the CFO only); and
• ESG objectives (10% weighting for the CEO; 5% weighting for the CFO).

Awards will also be subject to a Trading profit underpin.
Long-Term Incentive Plan
The Premier Foods Long-Term Incentive Plan (‘LTIP’) provides a clear link to our strategic goal of delivering profitable growth with sustainable share price growth over the medium to long-term. Maximum opportunity of 150% of salary. Awards are subject to a three-year performance period, followed by a two-year holding period. The proportion of awards which will vest for threshold performance is 20%. Awards are subject to malus and clawback provisions.
2021/22 LTIP award levels (no change):
• CEO – 150% of salary
• CFO – 100% of salary

Awards will continue to be subject to the following performance measures:
• Relative TSR (two-thirds weighting); and
• Adjusted EPS (one-third weighting).
Shareholding guidelines
Shareholding guideline of 200% of salary.

Executive directors are expected to retain 50% of shares from vested awards under the DBP and LTIP until they reach the guideline.
The current shareholdings reflect the fact that both the CEO and CFO are relatively new to their roles:
• CEO – 61% of salary
• CFO – 22% of salary

Relationship between ESG matters and remuneration arrangements

The Committee is aware of the increasing importance of ESG matters for both the Group and its stakeholders. An element of ESG was included in the executive directors’ annual bonus goals for 2020/21, and the weighting of this element has been increased in the CEO’s annual bonus goals for 2021/22. During the year a new ESG Committee was established with the CEO appointed as its Chair. In addition, as part of the Committee’s overall review of the Group’s remuneration strategy, it ensures that arrangements do not encourage behaviour which is not aligned with the Group’s ESG strategy. Further information regarding the Group’s approach to ESG is set out in the ‘Responsibility’ section of this website.

Wider workforce

During the year, Helen Jones was appointed as our Workforce Engagement NED. The Company has established employee forums at all sites across the Group and Helen has joined a number of meetings at both manufacturing and office sites, to listen to the views and concerns of colleagues. These have been reported to, and discussed by, the Board and the Committee.

During the year, the Committee also reviewed information on broader workforce pay policies and practices which provided important context for the decisions on executive pay taken during the year. The pension levels for the executive directors are aligned with that available to the majority of the workforce. The operation of the annual bonus scheme is consistent for all participants, and any financial measures are aligned with the overall Group targets.

The executive directors have other additional constraints on their remuneration package which are not applicable to the wider management population, such as bonus deferral and the LTIP holding period.

As well as the two bonus payments and additional holiday entitlement that was awarded to the wider workforce, we also operate an all-employee Sharesave Plan which allows all colleagues to share in the success of the Group. The colleague participation rate in this scheme is currently 27%.

Senior management and the wider workforce

The remit of the Committee includes the oversight of remuneration for senior management (who are defined as the Group’s Executive Leadership Team) as well as reviewing workforce remuneration and related policies, and the alignment of incentives and rewards with culture. Remuneration for executive directors is set within the context of the Group’s remuneration policy for the wider workforce. The key differences of quantum and structure in pay arrangements across the Group reflect the different size of roles and levels of accountability required for the role and that executive directors and senior management have a much greater emphasis on performance-based pay through the annual bonus and the LTIP.

Salaries for management grades are normally reviewed annually (currently in July each year) and take account of both business and personal performance. Specific arrangements are in place at each site, which may be annual arrangements or form part of a longer-term arrangement, and the Board is kept regularly updated on these arrangements.

The Committee reviews the level of salary increases for colleagues not involved in collective bargaining and also reviews the annual bonus plan for the general management population. Financial objectives for executive directors and the management population are aligned and strategic objectives are cascaded down the management structure. In 2018/19, the Committee approved changes to the management scheme to make it more competitive and to help aid recruitment and retention. Senior management participate in long-term incentive arrangements reflecting their contribution to Group performance and enhancing shareholder value. All employees are encouraged to own shares in the Company via the Sharesave Plan and executive directors through our shareholding guidelines.

Share ownership, vesting and retention periods

To align executive directors’ interests with those of shareholders they are expected to retain 50% of shares from vested awards under the Deferred Bonus Plan (DBP) and the LTIP (other than sales to settle any tax or NICs due) until they reach a value at least equal to 200% of their annual salary (valued at the time of purchase or vesting). In addition, to encourage a focus on the long-term sustainable development of the business, retention periods have been introduced for both the annual bonus scheme and Long-Term Incentive Plan. One-third of any annual bonus award is deferred into shares for three years under the DBP. In addition, any shares which vest under LTIP awards granted since 2018 will be deferred for a further two-year period.

Non-executive directors

Fees payable to non-executive directors are determined by the Board. The level of fee is set in the context of the time commitment and responsibilities required by the role. As a result, additional fees are payable to the Chairs of the Audit and Remuneration Committees and also for the role of Senior Independent Director. These are reviewed on a periodic basis. No change has been made to the basic NED fee since 2009.

A copy of the 2020/21 Directors' Remuneration Report is available here.
A copy of the 2020 Directors’ Remuneration Policy is available here.