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

Mitchells & Butlers plc – Annual report – 24 September 2022

Industry: leisure

Report on Directors’ remuneration (extract)

Pay ratios

The table below sets out the Chief Executive pay ratio at the median, 25th and 75th percentiles for 2022. 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 four 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 24 September 2022. 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 (c. 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 and exclude the value of any awards under the free share element of the SIP.

Pay details for the individuals are set out below:

The Chief Executive’s base salary increased by 3% from 1 January 2022 but was offset by an equal reduction in pension contributions compared. This compares to an overall increase in employee pay of over 6%. The ratio between the base pay of the Chief Executive and the base pay of employees at each quartile has reduced slightly as a result. On a total pay basis, the ratio of workforce pay to the Chief Executive’s total pay has increased, reflecting the higher levels of variable pay from the annual bonus plan. The Committee believes that the ratio is broadly consistent with that of other organisations in hospitality and retail. The overall trend in the median ratio aligns with the movement in the single total figure of remuneration over time.

Hourly-paid employees do not participate in the annual bonus plan, whereas salaried employees do participate in an annual bonus plan (c. 6,000 employees). The median pay ratio is consistent with pay and progression policy for UK employees. 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.