Remuneration Committee Annual Report 2022/23

Remuneration Policy

The Remuneration Committee determines the remuneration of the President and Vice-Chancellor, as well as the remuneration of other senior post holders, as defined in the Committee’s terms of reference. The Committee also has oversight of the remuneration arrangements for other senior members of staff, including members of our professoriate and senior professional services staff.

The full Terms of Reference of the Remuneration Committee publicly available here.

Executive Remuneration Principles

In determining the remuneration of the President and Vice-Chancellor and senior post holders, Remuneration Committee apply the following principles and approaches:

• Remuneration decisions should balance the need to attract, retain, motivate and reward high quality leaders in a competitive international environment with the need to demonstrate sustainable, effective and proportionate use of resources in the context of student, staff and public expectations.
• There should be clear distinction between inflation-related, performance-related and market-related remuneration decisions. Note 2: Senior post holders in the University participate in the same appraisal arrangements as other employees at Level 4 and above, with contribution assessed with reference to agreed expectations and objectives. The University’s key performance indicators are themed according to the core principles and goals set out in the University Strategy and incorporate measures of student satisfaction and career prospects, staff engagement, financial sustainability, research quality, entry standards, international reputation and league table rankings.

Note 1: It is for the Remuneration Committee to determine application of an inflationary uplift, which will normally be made in line with the corresponding UCEA or NHS annual pay uplift applicable to other University employees. Performance-related remuneration decisions recognise sustained performance through salary. The University does not operate a contractual performance-related bonus scheme for members of University Executive Board.

• Remuneration decisions should be considered with reference to a range of qualitative and quantitative supporting information, including:
  • Individual and institutional performance data, including appraisal outcomes and University key performance indicators. 
    Note 2: Senior post holders in the University participate in the same appraisal arrangements as other employees at Level 4 and above, with contribution assessed with reference to agreed expectations and objectives. The University’s key performance indicators are themed according to the core principles and goals set out in the University Strategy and incorporate measures of student satisfaction and career prospects, staff engagement, financial sustainability, research quality, entry standards, international reputation and league table rankings.
  • Market pay benchmarking data, with particular reference to the median remuneration of equivalent or comparable roles within the Russell Group, and especially those in universities of similar size and complexity to Southampton. 
    Note 3: The UCEA Senior Staff Remuneration Survey is the primary source of market pay data used by the Remuneration Committee, with this supplemented by data from other sources, including the annual CUC survey of Vice Chancellors’ remuneration, HESA salary data, commercial benchmarking data and specifically-commissioned reviews and reports, where required.
  • Internal pay benchmarking data, with particular reference to the pay settlements, incremental pay progression, pension schemes and other benefits applicable or available to other University of Southampton employees
  • The remuneration levels of senior staff in partner employers, notably the National Health Service. 
    Note 4: Many of our highest-paid staff are clinicians, paid at salary levels determined by the NHS, not by the University.
  • Matters of equlity, diversity and inclusion.
  • Job evaluation data, particularly in establishing the relative complexity and value of new or revised roles. 
    Note 5: The University uses the Korn Ferry/Hay job evaluation methodology for roles at all levels.
  • Data on the recruitment and retention of senior staff.
• Remuneration decisions should focus on the value delivered by individuals acting within their executive roles. This does not preclude individuals from pursuing activities beyond the scope of their executive role, but any such activities should not be detrimental to the conduct of their executive role, and will not be the focus of executive remuneration decisions.
• In accordance with the Ordinances of the University, some executive roles are appointed on a permanent basis, whist others are appointed on a time-limited basis. Executive remuneration should be structured accordingly and be time-bound where appropriate.

Other Remuneration and the Reimbursement of Business Expenses

The University’s Consultancy Policy, which is publicly available here, sets out the University’s policy on the retention of income generated through external engagements. This policy applies to all employees, including those within the remit of the Remuneration Committee.

The University’s Expenses and Benefits Manual, which is publicly available here, sets out the University’s policy on the reimbursement of business expenses. This policy applies to all employees, including those within the remit of the Remuneration Committee.

Membership, Attendance and Activity of the Remuneration Committee

The members of the Remuneration Committee are all lay members of the University’s governing body, Council, and are independent of University management. Membership comprises the Chair of Council, the Vice-Chair of Council (who is the Chair of the Remuneration Committee), the Treasurer and two other lay members of Council.

All members of the Remuneration Committee are appointed by the Nominations Committee (whose Terms of Reference are publicly available here) with a focus on ensuring an appropriate balance of relevant skills, experience and competencies. Where necessary, additional expert advice and guidance is sought to inform the Committee’s decision making.

The Committee met three times between 1 August 2022 and 31 July 2023 and corresponded on matters relevant to the Committee on a number of occasions between meetings. Membership and attendance at meetings during this period was as follows:

In accordance with the Terms of Reference of the Remuneration Committee, the Chair of the Committee may invite other attendees as appropriate, subject to the proviso that no attendee is ever present for any agenda item that concerns their own remuneration, or which for some other reason would cause a conflict of interest. Other attendees during the year were as follows:

• The President and Vice-Chancellor, who attended a part of one meeting by invitation to provide a commentary and answer queries from the Committee in relation to his pay recommendations for senior post holders. He was not present for any discussion relating to his own remuneration.
• The Executive Director of Human Resources, who attended all three meetings to provide advice and guidance to the Committee. She was not present for any discussion relating to her own remuneration.
• The Head of Reward, Recognition and Inclusion, who attended all three meetings as secretary to the Committee, and to provide advice and guidance.

Meeting 1: 21 November 2022

The Committee received a report setting out recommendations for the remuneration of Senior Post Holders. These recommendations were presented alongside supporting information including appraisal outcomes, the University’s Executive Remuneration Principles, contextual pay information – particularly the pay uplifts applicable to other University employees – and details of the current remuneration and benchmarking position of each of those under consideration.

The Chair had invited the President and Vice-Chancellor to attend this part of the meeting, allowing him to provide a commentary to accompany the pay recommendations and to answer queries from the Committee in relation to those recommendations. The President and Vice-Chancellor then left the meeting.

Following detailed discussion of each proposal, the Committee agreed outcomes which resulted in a mean increase in total pay of 4.0% for Senior Post Holders, inclusive of cost-of-living uplifts, plus 0.1% in non-consolidated awards. 

The Committee then reviewed the pay of the President and Vice-Chancellor, taking into consideration the University’s executive remuneration principles, a comprehensive range of comparator data and contextual information and the Chair of Council’s appraisal summary, to inform discussion and decision-making.

The Chair of Council reported to the Committee on the process, content and outcomes of the President and Vice-Chancellor’s appraisal, as well as a range of relevant University performance indicators, noting almost exclusively positive outcomes and indicators of Professor Smith’s leadership, evidenced both qualitatively and quantitively.

The Committee discussed, in depth, a fair and appropriate remuneration outcome for the President and Vice-Chancellor that was reflective of the excellent progress of the University during the year, under his leadership, whilst being mindful of the wider context of pay – and particularly the pay increases applicable to other University employees during the year – and the sensitivities surrounding Vice-Chancellor remuneration.

At the conclusion of these discussions, the Committee agreed that the President and Vice-Chancellor’s salary should increase by 3.0% with effect from 1 August 2022, in line with the 2022 national pay settlement (cost-of-living award), and by 2.5% with effect from 1 December 2022 to recognise his consistently excellent performance, noting in particular the level of achievement against agreed objectives, the delivery of the new University strategy, the improvement in both national and international league table positions, with strong REF and NSS outcomes and outstanding KEF results.

• Reviewed and agreed amendments to the Committee’s terms of reference; moving them into the University’s new accessible template and simplifying the way ‘senior post holders’ were defined.
• Reviewed the final draft Remuneration Committee Annual Report for 2021/22, prior to its submission to Council for approval and subsequent publication alongside the University’s 2021/22 financial statements.

Meeting 2: 7 March 2023

The Committee held a detailed discussion of the content of a paper on gender and ethnicity pay gaps. The paper set out the University’s current and historical gender and ethnicity pay gaps, along with information to prompt an informed discussion about appropriate and achievable targets. This included comparisons with other Russell Group universities’ gender pay gaps, disaggregated internal pay gaps, and an accompanying paper highlighting the role of Simpson’s Paradox in potentially masking underlying pay gap trends.

The Committee recognised the value of careful use of disaggregated pay gaps (in this case, reporting gaps for academic and professional services employees separately), as a means of showing underlying trends sometimes obscured by aggregated figures, but expressed caution that the over-use of disaggregation could falsely give the impression that the University was more concerned to present favourable data than to seek to narrow its overall pay gaps. It was also noted that statutory pay gap reporting was a lagging measure. A balanced approach is therefore required.

The Committee noted the importance of a range of policy measures for reducing longer term gender and ethnicity pay gaps, including securing more diverse recruitment and promotion in different pay groups, and at senior levels, alongside more sustained retention of staff. It expressed interest in continuing this discussion and understanding where other Russell Group members were achieving better pay gap levels.

The Committee resolved that pay gap monitoring should be added as a standing item to Remuneration Committee’s yearly agenda, including both aggregated and disaggregated reporting, and Russell Group comparator data.

The Committee then received a briefing on the series of local and national pay changes, negotiations and consultations taking place in early 2023, out of sequence with normal pay review cycles.

This was followed by a report prompting discussion and decision on the applicability of the University’s 1 January 2023 pay scale enhancement and the nationally set 1 February 2023 and 1 August 2023 pay uplifts to those within its remit for pay determination. The Committee gave approval for each of these uplifts to be applied to those within the Committee’s remit for pay determination, including the President and Vice-Chancellor, consistent with the treatment of other employees.

In other business, the Committee:

• Noted an increase to full-time for the Vice-President (International and Engagement).
• Approved an amendment to pay on appointment for the incoming Chief of Staff and Chief Strategy Officer, reflecting a delayed start date.

Meeting 3: 11 July 2023

Much of this meeting was given over to a discussion of the potential future role of Remuneration Committee, in light of a recently completed independent review of Council by the Halpin Partnership. The outputs of the discussion were relayed to Nominations Committee to inform the development of options to be considered by Council later in 2023.

In other business, the Committee:

• Reviewed and approved pay on appointment parameters for the appointment of the Executive Director, Finance. [An appointment was subsequently made within these parameters].
• Received an update on national pay negotiations and pension tax changes, as well as an update on the latest pay benchmarking data for roles within the Committee’s remit.
• Reviewed and agreed further minor changes to the Committee’s terms of reference to accommodate revisions to the University Ordinances applying from 1 August 2023.

Remuneration of the President and Vice-Chancellor

Professor Mark E Smith CBE took up post as President and Vice-Chancellor on 1 October 2019 and was paid a salary of £287,000 from his appointment until 31 July 2021. With effect 1 August 2021, Remuneration Committee approved a 1.5% inflation-related increase to his salary (to £291,305), in line with the 2021/22 UCEA pay settlement, and a further 1.5% performance-related increase to salary (to £295,610), which took effect on 1 December 2021.

During the year covered by this report, Remuneration Committee approved a 3.0% inflation-related increase to Professor Smith’s salary (to £304,478) with effect 1 August 2022, in line with the 2022/23 UCEA pay settlement, and a further 2.5% performance-related increase to salary (to £311,869), with effect from 1 December 2022. This was then followed by the application of a 2.0% increase to salary (to £318,106) with effect 1 January 2023, consistent with the treatment of other University employees as the University made enhancements to its pay scales at the start of 2023, and a further 2.0% increase to salary (to £324,469) with effect 1 February 2023 as the first stage of the 2023/24 UCEA pay settlement was applied – again consistent with the treatment of other University employees. Overall, Professor Smith received £316,225 in salary between 1 August 2022 and 31 July 2023.

Professor Smith elected to purchase additional holiday during the year, resulting in deductions from his salary of £7,270.

Professor Smith is a member of the Universities Superannuation Scheme (USS) with the USS Voluntary Salary Cap in place, limiting the accrual of pension benefits to part of his salary. He receives a supplement in lieu of pension, which amounted to £23,123 for the period from 1 August 2022 to 31 July 2023, in respect of the non-pensionable part of his salary. The University made the required employer pension contributions during the year, including the required scheme deficit recovery charge.                                                                                

In common with other senior post holders, the University provides Professor Smith with single membership of a healthcare scheme to help ensure his availability for work, at a cost of £871 for the period from 1 August 2022 to 31 July 2023.

For the better performance of his official duties, and as required by contract, Professor Mark Smith lives at the Vice-Chancellor’s official residence in Southampton whilst serving as President and Vice-Chancellor. The residence is used regularly for University meetings and official functions. These living arrangements incurred a taxable benefit of £6,810 and a non-taxable benefit of £6,985 based on market rental prices, during the year. These figures are higher than the previous two years, reflecting the continuing increased use of the facility post-COVID.

In the period from 1 August 2022 to 31 July 2023, Professor Smith’s total remuneration was 8.3 times higher than the median total remuneration of all University employees (£45,864 per annum) and 10.4 times higher than the median total remuneration of all University staff, including casual workers (£36,536 per annum).

For the same period, Professor Smith’s basic salary was 8.2 times higher than the median basic salary of all University employees (£38,626 per annum) and 9.7 times higher than the median basic salary of all University staff, including casual workers (£32,458 per annum).

Remuneration Committee will continue to update Council on a regular basis throughout the year and will publish this Annual Report at the beginning of December each year.

Remuneration Committee 

Southampton

21 November 2023

Annex 1: Terms of Reference of Remuneration Committee

Origin

Remuneration Committee is a sub-committee of Council. 

Remuneration Committee is constituted in accordance with requirements of The Higher Education Senior Staff Remuneration Code.

Purpose

The purpose of Remuneration Committee (‘the Committee’) is to ensure the proper remuneration of the University’s senior post holders, as well as to have oversight of remuneration arrangements for other senior members of staff. 

For these purposes, the following definitions are applied: 

• ‘Senior post holders’ means incumbents of the roles listed in Schedule 1 
• ‘Other senior members of staff’ means (apart from those already included as ‘Senior post holders’): 
  • Named Office holders as listed in Schedule 2. 
  • Level 7 employees; and 
  • Any other employee paid a basic salary of £100,000 or more per annum.

Responsibilities and activity

1. Determine the remuneration of the President and Vice-Chancellor. 
2. Determine the policy by which the remuneration of other senior post holders is set. 
3. Review and approve the remuneration of other senior post holders on receipt of recommendations from the President and Vice-Chancellor or their nominee. 
4. Approve the principles by which the remuneration of Named Office holders is set. 
5. Approve the principles by which the remuneration of Level 7 employees is set. 
6. Monitor the remuneration processes applying to Named Office holders, Level 7 employees and any other employee paid a basic salary of £100,000 or more per annum. 
7. Review and approve severance arrangements for senior post holders, Named Office holders and any other employee paid a basic salary of £100,000 or more per annum.

In discharging its responsibilities. the Committee will: 

8. Consider the context in which the University operates. 
9. Consider senior remuneration in the context of remuneration for all staff. 
10. Consider benchmarking data as relevant to these Terms of Reference. 
11. Consider equality, diversity and inclusion data as relevant to these Terms of Reference. 
12. Ensure that any equality impacts are considered as part of decision-making processes. 
13. Consider the public interest and the safeguarding of public funds alongside the interests of the institution when considering all forms of payment, reward and severance to the staff within its remit. 
14. Ensure the body is fit for purpose by performing an effectiveness review every three years.

Reporting arrangements

The Committee shall comprise: 

• The Chair of Council 
• The Vice-Chair of Council 
• The Treasurer 
• Two lay members of Council 

The Vice-Chair of Council will normally be the Chair of the Committee. In the event that the Chair of Council is Chair of the Committee, they may not chair any discussion in relation to item i. of these Terms of Reference. 

Other attendees: 

• The Committee shall be supported by the Executive Director of Human Resources or their nominee, who shall provide or arrange provision of appropriate advice and guidance to the Committee, and act as secretary to the Committee. 
• The Chair of the Committee may invite other attendees as appropriate. 
• No attendee will be present for any agenda item which concerns their own remuneration or which for some other reason would cause a conflict of interest.

Quorum and frequency

Quorum:

• Quoracy is a minimum attendance of 1/3 of the membership plus one person, one of whom must be the Chair or Vice-Chair of Council. 

Frequency of meetings 

• The Committee shall meet with such frequency and at such times as it may determine.

Resources

Secretariat support shall be supported by the Executive Director of Human Resources or their nominee

Terms of Reference review

Date of last review: 11 July 2023 (with effect 1 August 2023) 

Date of next review: July 2024

Schedule 1 

Senior post holders: 

• President and Vice-Chancellor 
• Senior Vice-President (Academic) 
• Vice-President (Education and Student Experience) 
• Vice-President (International and Engagement) 
• Vice-President (Operations) 
• Vice-President (Research and Enterprise) 
• Deputy Vice-President (Operations)
• Dean of the Faculty of Arts and Humanities 
• Dean of the Faculty of Engineering and Physical Sciences 
• Dean of the Faculty of Environmental and Life Sciences 
• Dean of the Faculty of Medicine 
• Dean of the Faculty of Social Sciences 
• Executive Director, Finance and Planning 
• Executive Director, Human Resources 
• Executive Director, Estates and Facilities 
• Chief of Staff and Chief Strategy Officer

Schedule 2

Named Office holders are the incumbents of the following roles: 

• Heads of School 
• Associate Deans 
• Associate Vice-Presidents 
• Directors of the University’s Strategic Interdisciplinary Research Institutes