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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 work of the Workforce engagement NED provides an opportunity for engagement with colleagues on executive remuneration. 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 2023 Directors’ Remuneration Policy, which was submitted for shareholder approval at the AGM in July 2023. (See the 2022/23 Directors’ Remuneration Report below for more information).

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 considers that the current arrangements are clear, easy to understand and provide an appropriate balance between fixed and variable remuneration. During the year, the Committee reviewed the annual bonus and LTIP measures for the executive directors and believes that they remained aligned to the delivery of the Group’s strategy and that they were suitably stretching.

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 mitigate

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. Malus and clawback provisions apply in line with current best practice expectations. 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 polic

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 2023 Remuneration Policy approved by shareholders at the 2023 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 performanc

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 strateg

As part of the preparation of the 2023 Directors’ 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.

2023 Directors’ Remuneration Policy

The 2023 Directors’ Remuneration Policy was approved by shareholders at the AGM on 20 July 2023. The 2023 policy is available by following the link provided below.

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 has been included in the executive directors’ annual bonus goals since FY20/21, with the weighting of this element aligned for both executives' annual bonus goals for FY22/23. ESG will form part of the executives’ annual bonus for FY23/24, with these goals directly linked to the delivery of the Group’s ESG strategy, the Enriching Life Plan. In addition, as part of the Committee’s overall review of the Group’s remuneration strategy, it ensures that arrangements do not encourage behaviour that is not aligned with the Group’s ESG strategy.

Wider workforce

This year, the management team has been conscious of the impact of the cost of living crisis on the workforce as a whole and, as a result, two payments were made to factory-based colleagues over the course of FY22/23. In addition, reflecting the Group’s strong performance in FY22/23, a discretionary bonus was paid to all colleagues who are not part of the annual bonus scheme.

During the year, the Workforce Engagement NED provided updates on meetings held with colleagues across the business, which covered a range of topics including engagement on executive remuneration and how it aligns with pay for the wider workforce. 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.

The Group also operates 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 34%.


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 scope 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 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. 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 200% of salary in shares, (valued at year end). The Committee will review progress against the requirements, noting that the executive directors 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 the guideline is reached. Retention periods have been introduced for both the annual bonus scheme and Long-Term Incentive Plan to encourage a focus on the long-term sustainable development of the business. One-third of any annual bonus award is deferred into shares for three years under the DBP and 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. No change has been made to the basic NED fee since 2009.

A copy of the 2022/23 Directors' Remuneration Report is available here.
A copy of the 2023 Directors’ Remuneration Policy is available here.