REMUNERATION REPORT

Remuneration Policy

The remuneration of senior civil servants is set in accordance with the rules set out in chapter 7.1, Annex A of the Civil Service Management Code and in conjunction with independent advice from the Review Body on Senior Salaries (SSRB). In reaching its recommendations, the SSRB is to have regard to the following considerations:

the need to recruit, retain and motivate suitably able and qualified people to exercise their different responsibilities
regional/local variations in labour markets and their effects on the recruitment and retention of staff
Government policies for improving the public services including the requirement on departments to meet the output targets for the delivery of departmental services
the funds available to departments as set out in the Government’s departmental expenditure limits
the Government’s inflation target

Performance based pay awards are based on an assessment of performance against objectives agreed between the individual and line manager at the start of the reporting year. Performance will also have an effect on any bonus element awarded.

Further information about the work of the SSRB can be found at www.ome.uk.com

Service Contracts

Civil Service appointments are made in accordance with the Civil Service Commissioner’s Recruitment Code, which requires appointment to be made on merit on the basis of fair and open competition but also includes the circumstances when appointments may otherwise be made.

Unless otherwise stated below, the officials covered by this report hold appointments which are open-ended until they reach the normal retiring age. The retirement age for the Senior Civil Service rose from 60 to 65 from 1 October 2006 in line with the implementation of the Employment Equality (Age) Regulations 2006. However, once an individual’s pension becomes payable, from age 60, that employee can choose to leave work and draw his or her pension at any time, subject only to compliance with the basic notice of leave requirements.

The rules for termination are set out in chapter 11 of the Civil Service Management Code. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme. Further information about the work of the Civil Service Commissioners can be found at www.civilservicecommissioners.org

During the year the following changes to the Corporate Board membership took place:

Dr Richard Scott – Director of Business Improvement – joined 1 August 2008

Mr Guy Houston – Director of Finance & Corporate Services – left 28 November 2008

Dr Malcolm Reed – Chief Executive – left 17 February 2009

Mr David Middleton – Chief Executive – joined 9 February 2009

Transport Scotland has two non-executive directors. Independent non-executive directors bring an external perspective to the consideration of corporate management issues. Non executive directors are appointed by the Chief Executive for an initial period of three years following an open competition. Such appointments can be terminated at one month’s notice period. There is no provision for compensation for early retirement. Additionally, the non-executive directors do not participate in the Civil Service pension scheme.

Dr Iain Docherty and Dr Jacqueline Redmond, our non-executive Directors, have accepted an invitation to extend their service to Transport Scotland until 2010. They were initially appointed to our Board in May and June 2006 respectively for a period of three years. This extension to their appointment was agreed by Scottish Ministers.

Remuneration Group

For senior civil servants, Transport Scotland’s remuneration committee is the Scottish Government’s Remuneration Group. This Remuneration Group has six members, two of whom are non-executive directors. Their remit is to consider:

annual pay proposals for chief executives and board members and make recommendations to Ministers
annual guidelines for flat rate increases for chief executives and board members and consider the Public Sector Pay policies which will apply for the annual pay round and make recommendations to Ministers
pay remits which look at pay proposals for public bodies in Scotland.

The Remuneration Group will, as a minimum, report annually to the Strategic Board.

The following section of the Remuneration Report pertaining to salaries and pensions is subject to audit.

Salary

Salary includes gross salary, performance pay or bonuses, overtime, reserved rights to London weighting or London allowances, recruitment and retention allowances, private office allowances and any other allowance to the extent that it is subject to UK taxation.

Where a director has joined or left the Corporate Board during the year, their salary reflects only that which they received whilst a member of the board. Where an individual has been a member of the Board for only part of the year but they have been employed by the Department throughout the year, their annual salary has been reported on a "days served" basis as well as the full year equivalent salary.

Any amounts payable on early termination of a contract will be in accordance with the individual’s circumstances.

Benefits in kind

The monetary value of benefits in kind covers any benefits provided by the employer and treated by HM Revenue and Customs as a taxable emolument.

Fees

Non-executive directors receive fees for regular attendance at monthly board meetings and quarterly Transport Scotland Audit Committee meetings. Non-executive members expenses incurred in attending these meetings are also reimbursed.

The fees of the non-executive members of Transport Scotland are as follows:

	£000
Dr Jacqueline Redmond	5.4
Dr Iain Docherty	5.4

Executive Director Salary Information

The salary and the value of any taxable benefits in kind of the Corporate Board Members were as follows:

	2008/09	2008/09	2007/08	2007/08
	Salary & Performance Related Pay (excl Pension Contributions)	Benefits in Kind (To nearest £100)	Salary & Performance Related Pay (excl Pension Contributions)	Benefits in Kind (To nearest £100)
	£000	£	£000	£
Chief Executive
Malcolm Reed (retired 17.02.09) (1)	175-180	Nil	125-130	Nil
David Middleton (joined 09.02.09) (2)	15-20	Nil	n/a	n/a
Directors
Jim Barton	70-75	Nil	75-80	Nil
Frances Duffy	70-75	Nil	75-80	Nil
Guy Houston (resigned 28.11.08) (3)		Nil	90-95	Nil
Ainslie McLaughlin	75-80	Nil	65-70	Nil
Bill Reeve	100-105	Nil	95-100	Nil
Richard Scott (joined 01.08.08) (4)	40-45	Nil	n/a	n/a

Salaries include Performance Related Pay earned in the prior year and paid in the current year

(1) Malcolm Reed retired from his position as Chief Executive and departed from Transport Scotland on 17 February 2009. By agreement Dr Reed was paid 6 months salary in lieu of notice.
Dr Reed’s annual salary for 2008/09 if he had remained in post all year would have been in the range £120k – £125k. As well as his basic salary for the month up to 17 February 2009 (£6,174.59) he received a payment in lieu of the agreed 6 month notice period plus a payment for 21.5 days outstanding annual leave entitlement. The amounts were:- payment in lieu of notice - £61,019.50 and payment for annual leave - £7,809.45.

(2) David Middleton’s annual equivalent salary for 2008/09 is in the range £100k - £105k (excluding PRP).

(3) Guy Houston resigned from his position of Director of Finance & Corporate Services on 28 November 2008. Permission to disclose withheld.

(4) Dr Richard Scott joined Transport Scotland on 1 August 2008 as Director of Business Improvement. Since the departure of the Director of Finance & Corporate Services in Nov 2008, Dr Scott has combined his role in Business Improvement with that of interim Director of Finance & Corporate Services. Dr Scott’s annual equivalent salary for 2008/09 is in the range £60k - £65k.

Pensions

Accrued pension represents the directors’ total future entitlement to benefits payable from the Civil Service pension schemes based on reckonable service at 31 March 2009. The accrued pension includes service previous to becoming board members and/or service in other departments.

The cash equivalent transfer value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves the scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.

The CETV figures, and from 2003/04 the other pension details, include the value of any pension benefit in another scheme or arrangement which the individual has transferred to the Civil Service pension arrangements and for which the Civil Service Vote has received a transfer payment commensurate to the additional pension liabilities being assumed. They also include any additional pension benefit accrued to the member as a result of their purchasing additional years of pension service in the scheme at their own cost. CETV’s are calculated within the guidelines and framework prescribed by the Institute and Faculty of Actuaries.

The real increase in CETV quoted in the table below represents the real increase funded by the employer. It takes account of the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of period.

The Chief Executive and all Directors, except Bill Reeve, are members of the Principal Civil Service Pension Scheme (PCSPS) which provides benefits on a final salary basis at the normal retirement age. Transport Scotland’s contributions to the scheme in respect of the Management Board amounted to £104,139 for the year to 31 March 2009. Bill Reeve is a member of the Railways Pension Scheme and Transport Scotland’s contributions to that scheme were £20,400 for the year to 31 March 2009.

Further details on the different schemes available to employees can be found in note 2.

The pension entitlements of the executive Directors of Transport Scotland are shown in the following table:

	Lump Sum at age 60 as at 31 March 2009	Real Increase in Lump Sum at age 60	Accrued Pension at age 60 as at 31 March 2009	Real Increase in Pension at age 60	CETV as at 31 March 2009	CETV as at 31 March 2008	Real Increase in CETV in 2008/09
	£000	£000	£000	£000	£000	£000	£000
Malcolm Reed	–	–	5 to 10	0 to 2.5	129	94	28
David Middleton	115 to 120	0 to 2.5	35 to 40	0 to 2.5	736	737	8
Jim Barton	80 to 85	0 to 2.5	25 to 30	0 to 2.5	558	523	1
Frances Duffy	60 to 65	0 to 2.5	20 to 25	0 to 2.5	384	353	3
Guy Houston
Ainslie McLaughlin	75 to 80	0 to 2.5	25 to 30	0 to 2.5	509	468	11
Bill Reeve	30 to 35	0 to 2.5	30 to 35	0 to 2.5	464	406	*n/a
Richard Scott	20 to 25	0 to 2.5	5 to 10	0 to 2.5	162	140	14

Calculated on age 60 or current age if over 60

* Information from the Railway Industry Pension Scheme was not provided in this format

The CETV calculation for 2007/08 has been reassessed and there may be a slight difference between the final period CETV for 2007/08 and the beginning of 2008/09.

The above pensions data was supplied to Transport Scotland from the Department of Work & Pensions (DWP) for all of the directors with the exception of Bill Reeve for whom information was supplied by the Railway Industry Pension Scheme.

Further details about the Civil Service pension arrangements can be found at the website www.civilservice-pensions.gov.uk

David Middleton signature

David Middleton
Chief Executive
1 December 2009