Annual Report of the Remuneration Committee 2019-20

A. Introduction 

The Remuneration Committee is a formal sub-committee of the University Council.  

This report outlines the responsibilities of the Committee, and its key activities and decisions during the year to 31 July 2020 and reflects guidance provided by the Committee of University Chairs (CUC).  

The work of the Committee was somewhat unusual during this period, and did not follow the more usual annual pattern due to two major factors:

• The first half of the year was heavily dominated by the formal process for the recruitment of a new Vice-Chancellor, with several members of the Committee also being members of the Vice-Chancellor Appointment Panel.
• The demands of the COVID-19 pandemic, which required significant attention from members of Council, both on behalf of the University of Leeds, and in many cases, of their own organisations.

The business of the Committee was restricted to urgent matters only and this report reflects that focus.

Remuneration Committee terms of reference 

The terms of reference were reviewed by the Committee during 2020 as required and remained unchanged. They are as follows:

• In the light of comparative information on any salaries and other benefits and conditions of service in the sector, to review annually and to determine the remuneration of the Vice-Chancellor and all Executive direct reports to the Vice-Chancellor.
• To receive appropriate information on additional external income accruing to the Vice-Chancellor and all Executive direct reports to the Vice-Chancellor, and to consider the appropriateness of the policy on external income.
• To set the reward framework for senior post holders and to receive a report from the Professorial and Senior Staff Salary Review Committee.
• To note annually any salary increases which take a member of staff’s total remuneration package above £100,000, whether as an explicit retention decision or otherwise. 
• To note annually recruitment involving total remuneration packages above £100,000. 
• Taking into account both the University’s interests and the public interest, to advise the Council on any proposed severance settlement for the Vice-Chancellor; to approve any proposed severance settlements for other members of the University Executive Group (UEG); and to note severance settlements for other members of staff whose total remuneration package is over £100,000.
• To receive an annual update on the Gender Pay Gap.
• To report annually to the Council. The annual report will comply with the requirements of the Office for Students accounts direction.
• To review its terms of reference annually.

The annual review of the terms of reference is designed to ensure that they remain appropriate and compliant with relevant legislation and guidelines, and to ensure that the focus of the Committee’s work has addressed these priorities. 

Frequency 

The Committee meets at least twice per year, but will arrange for additional meetings as appropriate.

Membership 

The membership of the Committee consists of five lay members of Council, and for the period of this report, was as follows:

• Chair of Remuneration Committee – Liz Barber
• Pro-Chancellor – David Gray
• Lay nominees of Council – Ed Anderson, Helen Grantham and Iain Moffatt

It is the responsibility of Council to ensure that the membership of the Committee has the necessary skills, experience and support to meet the Committee’s responsibilities.

The Chair of the Remuneration Committee is an independent member of the Council other than the Chair of Council. The Vice-Chancellor and the Director of Human Resources are not members of the Committee, but will attend as follows: 

The Vice-Chancellor will attend for agenda items that relate to their role as line manager of the senior post holders, to enable the Committee to ensure full consideration of individual performance and organisational strategy when considering remuneration-related decisions. The Vice-Chancellor is not present for any matters that affect their own remuneration.

The Director of Human Resources is an advisor to the Committee, but is not present for any matters that affect their own remuneration. The Committee can, if they so wish, call upon external advisors as appropriate.

B. Operating environment 2019-20 

This year marked the end of the 2015-20 strategic plan period for the University but the year has been somewhat overshadowed by the global COVID-19 pandemic which took hold in the UK in March 2020. 

The pandemic has given an unprecedented shock to the global economy, and the higher education sector has not been immune to this. As well as taking measures to protect the health, safety and wellbeing of all students and staff, the University was decisive in its financial response in order to protect as much as possible and mitigate the significant financial risks.

The immediate response from a financial perspective focused on prioritising efforts to maximise the student recruitment outcome for 2020 entry; investing as needed to support the response to the COVID-19 pandemic, both in terms of delivering high quality online education and enabling remote working at scale; and implementing cost saving actions. 

The cost saving mitigations which were introduced from the end of March 2020 included a pause or deferral of new staff recruitment and new non-staff expenditure commitments (unless critical to support our response to COVID-19), as well as pausing or deferring any new capital commitments that may have been in the pipeline.

This decisive financial response allowed the University to report an underlying operating surplus in 2019-20 of £22m (before the movement in the USS provision) representing 3% of total income. This surplus is lower than the equivalent prior year operating surplus of £38m and has been adversely impacted by reduced residences and research income as well as unplanned costs to support the pandemic response.

C. Principles and approach to senior remuneration 

The University of Leeds recognises the value of the CUC’s Higher Education Senior Staff Remuneration Code and the Committee seeks to ensure compliance with this Code. In exceptional circumstances where compliance cannot be delivered, the Committee commits to providing meaningful explanations for non-compliance along with details of how any alternative arrangements meet the principles of the Code.

The Remuneration Committee has direct responsibility for determining remuneration related matters for both the Vice-Chancellor and for senior post holders at the University of Leeds. These are executive posts that report directly to the Vice-Chancellor, and for the period of this report consist of the following individuals:

• Sir Alan Langlands – Vice-Chancellor
• Professor Julia Bennell – Executive Dean: Leeds University Business School  – from 1 January 2020
• Professor Karen Birch – Executive Dean: Faculty of Biological Sciences – from 1 November 2019
• Professor Andrew Dougill – Executive Dean: Faculty of Earth and Environment
• Professor Frank Finlay – Executive Dean: Faculty of Arts, Humanities and Cultures  – to 31 December 2019
• Francesca Fowler – Director of Human Resources
• Roger Gair – University Secretary 
• Professor Jeremy Higham – Executive Dean: Faculty of Education, Social Sciences and Law – to 31 December 2019
• Martin Holmes – Marketing Director
• Dennis Hopper – Director of Campus Development
• Professor John Ladbury – Executive Dean: Faculty of Biological Sciences  – to 30 November 2019
• Professor Nora De Leeuw – Executive Dean: Faculty of Engineering and Physical Sciences – from 1 January 2020
• Jane Madeley – Chief Financial Officer
• Professor Peter Moizer – Executive Dean: Leeds University Business School – to 31 December 2019
• Professor Alastair Mullis – Acting Executive Dean: Faculty of Education, Social Sciences and Law – from 1 January 2020
• Tim Peakman – Chief Operating Officer
• Ian Roberts – Chief Information and Digital Officer – from 20 April 2020
• Professor Lisa Roberts – Deputy Vice-Chancellor: Research and Innovation
• Professor Stephen Scott – Acting Executive Dean: Faculty of Engineering and Physical Sciences  – to 31 December 2019
• Professor Paul Stewart – Executive Dean: Faculty of Medicine and Health 
• Professor Andrew Thorpe – Executive Dean: Faculty of Arts, Humanities and Cultures – from 1 January 2020
• Professor Tom Ward – Deputy Vice-Chancellor: Student Education
• Professor Hai-Sui Yu – Deputy Vice-Chancellor: International

In addition, the Committee receives updates on remuneration related matters affecting other groups of staff at the University of Leeds in order to enable it to fulfil its responsibility for ensuring that the organisation’s overall framework for remuneration is proportionate, appropriate, and enables the attraction and retention of talented individuals necessary to ensure the University meets its strategic ambition.

The University of Leeds is a large, complex and high profile institution requiring high performing, experienced leaders to continue its success and meet its strategic ambitions. When considering matters of remuneration, the Committee is required to balance many factors including market rates of compensation, the challenging financial circumstances facing universities, the external perceptions of senior pay, and internal equity factors.

To assist in delivering this balance, the Committee consider data from a wide range of sources, including, but not limited to, data from relevant Higher Education (HE) sector salary surveys, (for both senior staff and Vice-Chancellors), benchmark data from external reward consultancies, regional data for comparable positions within relevant NHS and Local Authority organisations, and data available on national pay trends.

Salaries

When reviewing salary levels for both the Vice-Chancellor and senior post holders, the Committee will be particularly mindful of the salary review principles being applied across the rest of the institution. This will include consideration of the anticipated cost of the nationally negotiated cost of living award, and the average percentage increase for incremental progression across university pay scales.

Any additional awards made for exceptional performance are carefully considered against data available for the average percentage cost of performance awards across the University’s wider population.

Salary determination at individual level will take account of:

• Individual performance – in the case of senior post holders, as determined by the Vice-Chancellor against individually agreed personal objectives; in the case of the Vice-Chancellor, as determined by the Chair of Council in consultation with members of Council, including members of Remuneration Committee.
• Organisational performance – university performance as determined against key internal and external indicators as articulated in the University’s strategic Key Performance Indicators (KPIs).
• Relevant market data on pay levels in comparable roles in comparable organisations.
• Affordability – the budget available for increases, in line with the principles articulated above.
• Retention issues – at either an individual role level, or across a particular professional or disciplinary field. 

Bonuses

The University does not formally operate a bonus scheme for senior post holders. In line with the approach taken with the wider university staff population, exceptional performance may result in the payment of a non-consolidated, non-pensionable recognition payment.

Pension

Senior post holders are eligible to participate in a pension scheme under the same conditions that apply to all University staff. Following a policy decision taken by the Remuneration Committee in May 2014, it is not University policy to make cash payments in lieu of pension contributions.

This position was reconfirmed following reconsideration by the Committee at its July 2019 meeting in the light of a University and Colleges Employers Association (UCEA) sector survey on pension tax policies. It was agreed the matter would be kept under regular review.

Benefits

The University does not offer additional benefits such as private health cover, or car payments as a standard part of the remuneration offer. On rare occasions, decisions relating to the need to offer any such benefits are considered on an individual case basis at the time of appointment, and are only made if it is considered necessary to secure the appointment of the University’s preferred candidate. 

Consultancy and external income

The University operates a Consultancy Policy that applies equally to all staff. All senior post holders are obliged to declare any such income and the Remuneration Committee reviews any payments made, and ensures compliance with the Consultancy Policy. 

Expenses

Senior post holders are expected to comply with the University’s current policy on Expenses.

D. Report on 2019-20

During 2019-20, the Committee met in April 2020 and July 2020 in order to carry out its responsibilities in a timely manner.

The March 2020 meeting was cancelled due to pressures arising from the COVID-19 pandemic. In addition, the Committee held a number of exceptional meetings during the period (September 2019 and January 2020) of the formal recruitment process for the new Vice-Chancellor.

Standing agenda items 

• Reviewed the terms of reference and confirmed that no changes were required.
• Reviewed and noted the data on recruitment and salary increases involving packages over £100,000.
• Noted that there had been no severance payments made to staff earning in excess of £100,000 since July 2019.
• Noted the data on external income accrued by members of University Executive Group during the period 1 July 2019 to 30 June 2020. The Committee reassured itself that such income was accrued in line with the University’s Policy on External Income.
• The Committee were advised that a full Gender Pay Report would not be produced this year due to the resource constraints resulting from the pandemic challenges. However, the data was being collated as part of the University’s ongoing commitment to a reduction of the gap, and would be shared with the Committee at a later date.

New agenda items

PWC, the University’s internal auditors, had completed their audit of the University’s compliance with the Committee of University Chairs HE Senior Staff Remuneration Code, and the related Office for Students Accounts Direction. The Committee noted that the report was positive and that the small number of recommendations were being implemented, albeit to a revised timescale given the impact of COVID-19 on the HR team. 

Senior post holders pay framework 

The Committee received an update on the ongoing work with Korn Ferry Hay (external reward consultants) relating to the development of a Remuneration Framework for University Executive leadership roles.

The Committee discussed the types of principles they would expect to see in a resultant University Executive Reward Framework and Principles approach and requested that, resource constraints allowing, the University should finalise this work by end of 2020-21. It was agreed that this would require the presentation of the draft document to the Remuneration Committee at its autumn 2020 meeting.  

Non-disclosure agreements 

The Committee agreed that they should receive an annual update on any non-disclosure agreements entered in to by the University, and that, as a matter of course, the Chair of the Committee should be advised of any such agreements at the point of action.

Vice-Chancellor recruitment

The Committee met on several occasions to receive updates on the progress of the Appointing Committee for the new Vice-Chancellor, and to give consideration to the formal terms and conditions relating to the appointment.

This involved the procurement of legal advice to ensure that the contractual terms of employment were robust and compliant with all areas of current legislation; a review of the remuneration packages of a wide range of Vice-Chancellors across the sector; and a reiteration of the University’s existing (and continuing) policy on various elements within the remuneration package, specifically in relation to pension provision and additional benefits.

The Committee also gave consideration to the fact that the existing post holder had taken only one salary increase since 2013, and that the Vice-Chancellor salary level at the University of Leeds may therefore have become uncompetitive. 

COVID-19 pandemic

The Committee was updated on the University’s decision to use the Government’s Coronavirus Job Retention Scheme (often referred to as the Furlough Scheme) and of the decision to maintain the pay of affected staff during the initial round of furloughing at 100%. 

Remuneration matters relating to senior post holders and Vice-Chancellor

Given the seniority of the individuals within the coverage of the Remuneration Committee, overall institutional performance is considered particularly relevant to the consideration of reward. The Committee were therefore mindful of the progress made by the University during the period 2019-20, as articulated in section B above.

However, given the exceptional circumstances impacting the sector as a result of the COVID-19 pandemic, discussions relating to senior pay focused on the financial challenges that the University was facing and the need for the Committee to maintain the motivation levels of senior staff against the backdrop of a potentially long running period of significant disruption.

The Committee were particularly mindful of the principle of equity across all roles at the University, and to be mindful of the approach being taken to staff across the University when considering senior pay.

Following a full discussion across two Remuneration Committee meetings, it was agreed that members of the University Executive Group and the Vice-Chancellor would not be asked to take a reduction in pay, but would be asked to accept a pay freeze for the current year. This was considered to be appropriate in view of the fact that the University had chosen to maintain the pay of furloughed staff at 100% and against the backdrop of the national proposal for a pay freeze.  

The Committee reserved its right to reconsider this position, should the initial approach to pay for the rest of the staff base be revised. 

Performance

In line with usual practice the Vice-Chancellor updated the Committee on the performance of each member of the University Executive Group. In addition, the Pro-Chancellor provided an overview of the Vice-Chancellor’s outstanding performance and leadership over the previous 12 months, and across the rest of his tenure.

Vice-Chancellor 

In the light of the fact that the Vice-Chancellor was leaving the University at the end of August 2020, there was no requirement for the Committee to consider the salary level of the exiting Vice-Chancellor. Discussions relating to the salary level for the incoming Vice-Chancellor had been held earlier in the year, and the new post holder would be entitled to the first review of salary at August 2021.

As required, the University has disclosed full details of the Vice-Chancellor’s remuneration in the Annual Accounts. All data presented relate to the exiting Vice-Chancellor, Sir Alan Langlands:

Emoluments of the Vice-Chancellor	2019-20 £000	2018-19 £000
Salary	281	281
Employer contributions to defined benefit scheme	13	13
Benefits in kind	0	0
Total	294	294

External income

Whilst the Vice-Chancellor holds a number of external appointments, he receives no income from any of these positions.

Expenses

The Vice-Chancellor complies with the University’s Expenses Policy, and information relating to his latest expenses claims can be found in the Governance section of the University website. 

Pay ratios

The Office for Students requires universities to publish two key ratios to show the relationship of the remuneration of the Vice-Chancellor to that of staff within the institution. The methodology adopted is in line with paragraph 12 of the Office of Students Accounts Direction issued October 2019. The University chose to adopt these revised guidelines early and as such has restated the previous year’s ratios to enable comparison. 

The figures are as follows:

Year	Basic salary ratio	Total remuneration ratio
2019-20	10.2	9.5
2018-19	10.4	9.9

In the interests of transparency, the University provides two further ratios to show the relationship of the remuneration of the Vice-Chancellor to that of employees within the University (a calculation that excludes those individuals who are engaged on worker and/or agency contracts).

The figures for employees are as follows: 

Year	Basic salary ratio	Total remuneration ratio
2019-20	7.8	7.1
2018-19	8.2	7.4

Other high paid staff

In line with the Accounting Standards requirements, the University publishes basic salary of other higher paid staff (calculated on a full time basis). The data for 2018-19 is prepared in accordance with paragraph 12 of the Office for Students Accounts Direction issued October 2019.The requirements have been updated to include both basic salary and market supplements.

Basic salary of other higher paid staff calculated on a full-time equivalent basis	2019-20 number	2018-19 number
£100,000 - £104,999	22	23
£105,000 - £109,999	51	53
£110,000 - £114,999	15	13
£115,000 - £119,999	12	9
£120,000 - £124,999	14	16
£125,000 - £129,999	8	10
£130,000 - £134,999	10	9
£135,000 - £139,999	4	4
£140,000 - £144,999	3	5
£145,000 - £149,999	2	2
£150,000 - £154,999	3	2
£155,000 - £159,999	3	4
£160,000 - £164,999	3	0
£165,000 - £169,999	0	1
£170,000 - £174,999	2	1
£175,000 - £179,999	3	2
£180,000 - £184,999	2	2
£185,000 - £189,999	0	1
£190,000 - £194,999	0	1
£195,000 - £199,999	1	0
£200,000 - £204,999	0	1
£205,000 - £209,999	1	2
£210,000 - £214,999	1	1
£215,000 - £219,999	1	0
£220,000 - £224,999	0	1
£225,000 - £229,999	0	0
Total	161	163

February 2021