Disclosure of CEO pay ratios with median, upper and lower quartiles

Mitchells & Butlers plc – Annual report – 26 September 2020

Industry: leisure

REPORT ON THE DIRECTORS’ REMUNERATION (extract)

PAY RATIOS

The table below sets out the Chief Executive pay ratio at the median, 25th and 75th percentiles for 2020, compared to 2019. Data is also presented for 2018 as Mitchells & Butlers has disclosed the pay ratio between the Chief Executive and the median pay of other employees for the last three years, despite not needing to comply with this requirement until the 2020 Annual Report.

The lower quartile, median and upper quartile employees were calculated based on full-time equivalent base pay data as at 26 September 2020. This calculation methodology was selected as the data was felt to be the most accurate way of identifying the best equivalents of P25, P50 and P75 and, therefore, the most accurate measurement of our pay ratios. Of the three allowable methodologies under the legislation, this method is classed as ‘Option C’. Option A was considered but given the high levels of team member turnover, it was felt more appropriate to adopt the approach set out above.

The employee pay data has been reviewed and the Committee is satisfied that it fairly reflects the relevant quartiles given the very large proportion of hourly paid team members employed by Mitchells & Butlers (circa 85% of the total workforce). The three representative employees used to calculate the pay ratios are hourly paid and the base pay elements were calculated using a full-time equivalent hourly working week of 35 hours. Hourly paid employees do not participate in the annual bonus plan or long-term incentive plan and in most cases do not have any taxable benefits. Employee pay does not include earnings from tips and service charge, from which many employees benefit. It is Mitchells & Butlers’ policy to pass all earnings from tips and service charges to employees without deduction for administration. The calculations are based on the single figure methodology.

Pay details for the individuals are set out below:

The Chief Executive’s base salary increased by 3% from 2019. However, as a result of the temporary waiver of part of his salary during the closure period, actual salary and pension contributions over the year were lower. The median pay ratio based on normal base salary and pension would be 40:1. Employee pay data is based just on worked hours converted to a full time equivalent and therefore were not impacted by furlough pay. On a total pay basis, the ratio of workforce pay to the Chief Executive’s total pay has decreased, reflecting the lower level of actual base pay and no annual bonus payout or long-term incentive plan vesting in the year.

As stated above, hourly-paid employees do not participate in the annual bonus plan, where salaried employees do participate in an annual bonus plan (circa 6,000 employees); they have also seen no bonus payout in FY 2020. More broadly, pay in the hospitality sector is lower than many other sectors and this will be an influencing factor in the overall pay ratio, despite significant increases in pay rates over the last few years.