Annual Report and Accounts 2008
7 Employee benefit costs
(a) Staff costs
| 2008 £m |
2007 £m |
|
|---|---|---|
| Wages and salaries | 773.8 | 709.3 |
| Social security costs | 92.6 | 76.1 |
| Pension costs (note 35) | 23.5 | 27.5 |
| Share-based payment (note 8) | 4.3 | 3.1 |
| 894.2 | 816.0 |
Included within wages and salaries are exceptional costs of £15.3m (2007: £5.0m).
The average number of employees, including Executive Directors, during the year was as follows:
| 2008 | 2007 | |
|---|---|---|
| Managerial and administrative | 4,250 | 4,123 |
| Operational | 40,760 | 37,431 |
| 45,010 | 41,554 |
Included in the above costs are the following costs related to the Group's key management personnel who comprise the Directors of the parent Company.
| 2008 £m |
2007 £m |
|
|---|---|---|
| Fees | 0.4 | 0.4 |
| Basic salaries | 1.1 | 1.2 |
| Benefits | 0.4 | 0.4 |
| Performance-related bonuses | 0.5 | 1.2 |
| Post-employment benefits | – | 0.1 |
| Share-based payment | 1.0 | 0.6 |
| 3.4 | 3.9 |
Information concerning Directors' emoluments, shareholdings and share options is disclosed in the Directors' Remuneration Report.
(b) Share schemes
Details of options or awards outstanding as at 31 December 2008 under the Group's share schemes are as follows:
| Number of share options 2008 |
Number of share options 2007 |
Exercise price | Future exercise periods |
|
|---|---|---|---|---|
| Executive Share Option Plan | 114,400 | 216,925 | 398p–963p | 2009–2014 |
| Long Term Incentive Plan | 891,365 | 1,054,170 | nil | 2009–2011 |
| Share Matching Plan | 247,957 | 222,676 | nil | 2009–2011 |
| Deferred Annual Share Bonus Plan | 302,533 | 237,509 | nil | 2009–2011 |
| WMT Long Service Option Scheme | 165,269 | 177,527 | 398p–1163p | 2009–2018 |
| Sharesave Scheme | 1,099,322 | – | 922p | 2009–2012 |
| 2,820,846 | 1,908,807 |
(i) Executive Share Option Plan
The Company operates tax approved and unapproved executive share option schemes open to Group employees in senior management positions (and formerly Executive Directors). Options granted by this Plan have a maximum term of ten years. The options vest after three years subject to the satisfaction of certain performance criteria1 based on the achievement of a target growth in earnings per share. If the performance criteria are not met when initially tested, in some instances they may be reassessed during the term of the option. From 2005 executive share option grants have been replaced by awards made under the Long Term Incentive Plan, as described in (ii). There are no cash settlement alternatives.
(ii) Long Term Incentive Plan (LTIP)
The LTIP was introduced in 2005 on the recommendation of the Remuneration Committee to replace the annual award under the Executive Share Option Plan to Executive Directors and to certain senior employees. Under the LTIP a Performance Award to acquire a specified number of free shares may be made to the employee or Director. In addition a Matching Award may be made, as described in (iii). Performance conditions are attached to the vesting of Performance and Matching Awards based on both the achievement of target growth in earnings per share and the relative total shareholder return (TSR) of the Company against a comparator group of companies. If the performance conditions are met Performance and Matching Awards vest on the third anniversary of the grant date and remain exercisable for a period of up to six months following the vesting date. There are no cash settlement alternatives at present.
(iii) Share Matching Plan (the Plan)
The Share Matching Plan was introduced in 2005 as part of the new Long Term Incentive Plan arrangements described in (ii). Under the Plan a Matching Award to acquire a specified number of shares for free may be made if the employee pledges a number of shares as investment shares which are then matched by the Company on either a 1:1 or 2:1 basis with the number of shares that could have been purchased with the pre-tax equivalent of the amount invested. The Matching Awards vest on the third anniversary of the grant date and remain exercisable for a period of up to six months following the vesting date. There are no cash settlement alternatives at present.
(iv) Deferred Annual Share Bonus Plan
The Deferred Annual Share Bonus Plan is a discretionary scheme which forms part of the bonus arrangements for certain senior employees. Under the scheme part of any bonus may be received in cash whilst the remainder is used to make an award of nil cost options which vest three years after the award date. The options must be exercised within six months of vesting. There are no cash settlement alternatives at present.
(v) West Midlands Travel Ltd (“WMT”) Long Service Option Scheme
The WMT Long Service Option Scheme utilises a fixed amount of shares set aside for this purpose following the acquisition of WMT in 1995 and is open to all WMT employees who have been in service for more than 25 years. The options are exercisable between three and ten years following the grant date. There are no cash settlement alternatives.
(vi) TWM Share Incentive Plan (the “SIP”)
The TWM SIP exists for the benefit of WMT employees. At the end of the year, 1,439 (2007:1,540) National Express Group PLC shares were held for the benefit of the Trustee. Dividends on shares held in the SIP forfeited shares account are waived. There are no cash settlement alternatives.
(vii) Savings Related Share Option Scheme (Sharesave Scheme)
The National Express Group approved Sharesave Scheme enables eligible UK employees, including Executive Directors, to acquire shares in the Company through monthly savings over a three-year period, at the end of which they also receive a tax free bonus. The savings and bonus may be used to purchase shares at a discounted option price set at the beginning of the savings contract. The options mature three years after the grant date and may be exercised for a period of up to six months after this date. There are no cash settlement alternatives.
1 Performance criteria for Executive Share Option Plan:
(a) Options granted under the 2002 National Express Group Executive Share Option Plan Part 2 Unapproved.
(b) The performance condition is as follows: (a) for awards up to 50% of salary; EPS growth of RPI + 4% pa, (b) for awards between 51% of salary and up to 100% of salary; EPS growth of RPI + 6% pa, (c) for awards between 101% of salary and up to 150% of salary; EPS growth of RPI + 8% pa, (d) for awards between 151% of salary and up to 200% of salary; EPS growth of RPI + 10% pa. Parts (a) and (b) are initially tested over years 0–3 with a facility to retest over years 0–4 and 0–5. Parts (c) and (d) are not subject to retesting. Straight-line vesting occurs between EPS levels.
(c) The performance condition is as follows: (a) for awards up to 50% of salary; EPS growth of RPI + 4% pa, (b) for awards between 51% of salary and up to 100% of salary; EPS growth of RPI + 5% pa, (c) for awards between 101% of salary and up to 150% of salary; EPS growth of RPI + 6% pa, (d) for awards between 151% of salary and up to 200% of salary; EPS growth of RPI + 10% pa. Performance is tested over years 0–3. Straight-line vesting occurs between EPS levels. Retesting is not permitted.