2.15 The Chief Executive pay ratio, said to use Option A, excludes part-time UK employees
UK Company A · a UK-listed medical technology group · Regulator-style question
In brief
The report says the pay ratios are calculated under Option A, which uses the full-time equivalent pay and benefits of all UK employees, and in the same paragraph that '[wording masked].' The 2025 report repeats the sentence. Option A as defined in the regulations does not provide for leaving part-time employees out; they are to be included at full-time equivalent. The report does not say how many were excluded or whether the ratios would change.
The evidence, as filed
Screenshot withheld to protect the company’s identity: Annual Report 2024, page 167; Annual Report 2025, page 188. Their wording or layout could lead back to the company even with names and figures masked; the evidence list below records what each page shows.
What the report shows, and what the rule requires
| What the annual report shows | What the rule requires |
|---|---|
| What the annual report shows Option A ratios (2024 median [n]:1) computed with part-time UK employees excluded; same wording in the 2025 report. | What the rule requires Option A applied to all UK employees, with part-time employees' pay and benefits grossed up to full-time equivalent, or the method described as a variant with its effect explained. |
The rule
SI 2008/410 Schedule 8 paragraph 19D(3)
Version relied on: Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), in force from April 2008, as amended (the directors’ remuneration report Schedule 8 as substituted from October 2013); revised text, legislation.gov.uk
Under Option A the company must calculate the pay and benefits of all its UK employees for the relevant financial year in order to identify P25, P50 and P75
SI 2008/410 Schedule 8 paragraph 19C(3)
Version relied on: Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), in force from April 2008, as amended (the directors’ remuneration report Schedule 8 as substituted from October 2013); revised text, legislation.gov.uk
“pay and benefits” of a UK employee means the employee’s full-time equivalent pay and benefits
Why it applies here: excluding them departs from the stated method; whether the percentiles move depends on the number and pay of part-time staff, which is not given.
Why it matters
The published ratios may not be the Option A ratios the report says they are, in both years; the direction and size of any effect are unknown.
Exposure
A method question on the pay ratio disclosure; no regulatory consequence expected unless the FRC raises it.
Our workings
the 2024 report says '[wording masked]' and '[wording masked]'; the 2025 report uses the same words. Law: paragraph 19D(3) says that under Option A the company must calculate the pay and benefits of all its UK employees, and paragraph 19C(3) defines pay and benefits as the employee's full-time equivalent pay and benefits, so part-time employees are within the population at their full-time equivalent.
Management’s best defence, and our reply
The company could argue that part-time employees are few, that grossing up their pay to full-time equivalent adds estimation, and that excluding them is unlikely to move the percentiles materially. It could add that the same approach has been applied every year, so the trend in the ratios is comparable. That defence may well be right on the numbers, which the report does not give. Because the regulations define Option A by reference to all UK employees on a full-time equivalent basis, the point is put as a question about the method and its effect rather than as an error.
The fix
- Include part-time UK employees at full-time equivalent pay and benefits, or explain the exclusion, the number of employees affected and its effect on each ratio.
Question for the company
Why were part-time UK employees excluded from the Option A pay ratio calculation in 2024 and 2025, how many employees does that remove, and what would the 25th, median and 75th percentile ratios be if they were included at full-time equivalent pay and benefits?
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | The 2024 ratios are said to use Option A | Document | Annual Report 2024, page 167 |
| 2 | Part-time UK employees are left out of the 2024 calculation | Document | Annual Report 2024, page 167 |
| 3 | 2024 median ratio [n]:1 computed on that basis | Document | Annual Report 2024, page 167 |
| 4 | The 2025 report repeats the exclusion | Document | Annual Report 2025, page 188 |
Prepared by Pramanex from the company’s published annual reports, without the company’s involvement, to show how an annual report review reads. The company is not named, and nothing on this page is a statement about any identifiable company. Observations are not an audit, review or other assurance engagement, and not legal advice. A regulator-style question is a question, not a conclusion.
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