Annual Report and Accounts 2016


John Lewis Partnership plc


95


In this section


Policy report Remuneration report Committee evaluation


Policy report What is the Partnership’s


pay policy? Each job in the Partnership has a pay range that is informed by the market for comparable roles in comparable organisations. The rate of pay for each Partner is reviewed on an annual basis with reference to the pay range set for the year and the Partner’s performance. All Partners have the opportunity to increase pay through their pay range as their performance develops. The same pay policy applies to setting pay for the Executive Directors and Senior Partners, defined as Partners at Partnership Level 4 and above, as for all Partners.


This approach is underpinned by Rule 61 and Rule 62 of the Constitution:


Rule 61:


‘The Partnership sets pay ranges which are informed by the market and which are sufficient to attract and retain high calibre people. Each Partner is paid a competitive rate for good performance and as much above that as can be justified by better performance. Partnership Bonus is not taken into account when fixing pay rates.’


Rule 62: ‘Pay rates must be decided with such care that if they were made public each would pass the closest scrutiny. Managers are responsible for ensuring that Partners are paid fairly in comparison with others who make a similar contribution.’


Under Rule 44 of the Constitution, the Chairman is ultimately responsible for ensuring that the system for deciding the pay and benefits of individual Partners is fair.


The Partnership does not operate annual incentive plans in the same way as comparable organisations. However, Partners who display outstanding performance may, on an exceptional basis, be recognised with a special contribution Bonus award of up to 10% of salary.


How does the Remuneration Committee determine pay?


The Remuneration Committee oversees how the pay policy is applied to the Chairman, Executive Directors, Senior Managers who report to the Chairman, Non-Executive Directors and the Partners’ Counsellor. When considering rates of pay, the Remuneration Committee takes into account:


a Individual performance, including the achievement of specific role related objectives and the Partnership Leadership Behaviours demonstrated in achieving those objectives


a The performance of the Partnership overall, reflecting the collective responsibility of the Executive Directors, as well as the performance of the function or Division for which the Partner is responsible, as appropriate


a The market context as advised by Willis Towers Watson, who are the Committee’s independent remuneration consultants


a The employment conditions and salary increases awarded to Partners across the workforce


a Rule 63 of the Constitution in the case of the highest-paid Partner


The review of Senior Partner pay takes account of not only what has been achieved, but also how it has been achieved. This reflects the same principles taken in the ‘My Performance’ appraisal framework used to assess the performance of all Partners.


The Remuneration Committee considers and reviews basic pay each year for Senior Partners within their remit. The basic pay is compared with amounts paid to Executives in similar organisations. When looking at the reward packages of other organisations, the Remuneration Committee focuses on the market median value of cash compensation, including basic pay and target annual Bonus as a benchmark for setting competitive pay ranges. The comparison excludes the value of pension benefit, long-term incentives and share schemes, which are widely available in the market at Executive Board level.


This approach is consistent with the benchmarking methodology for all senior Partners at Partnership Levels 1-4, agreed as part of the Senior Reward Review by the Partnership Board in 2014 and implemented during the 2015 Pay Review.


How do we ensure Committee independence?


The Remuneration Committee comprises four members, including two Non-Executive Directors and two Elected Directors. No decisions can be made by the Remuneration Committee without at least one Non-Executive Director and one Elected Director present, apart from when considering Non-Executive Directors’ remuneration, in which case two Elected Directors are required.


No member of the Committee takes part in any deliberations affecting their own remuneration.


In a nutshell


The Remuneration Committee oversees how the pay policy is applied to the Chairman, Executive Directors, Senior Managers who report to the Chairman, Non-Executive Directors and the Partners’ Counsellor. It comprises two Non-Executive Directors and two Elected Directors.


It’s Your Voice


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