Remuneration Policy

Remuneration Committee – Level 2 

1. Policy Statement

This Remuneration Policy is intended to meet the requirements of the Remuneration Part of the PRA Rulebook and the Remuneration Code for dual-regulated firms contained in SYSC 19D of the FCA Handbook (“together the Remuneration Codes”).

The Remuneration Policy is aligned with Al Rayan Bank’s strategic objectives, values and long-term interests. Its purpose is to ensure that Al Rayan Bank’s remuneration policies are consistent with, and promote, sound and effective risk management and do not expose the Bank to excessive risk and that the Bank attracts and retains appropriately qualified and experienced colleagues in line with the key principles of the Level 1 People Risk Policy.

The Remuneration Policy is set by the Board of Directors following advice and consideration provided by the Al Rayan Bank Remuneration Committee. It is reviewed at least annually by the HR Committee and the Remuneration Committee.

For the purposes of the Remuneration Codes, the Bank is a proportionality level 3 firm which means that it may disapply the provisions in the Remuneration Codes relating to retained shares or other instruments, deferral, performance adjustment and buy-outs (together “the Payout Process Rules”). Furthermore, as a proportionality level 3 firm, the rules relating to variable remuneration not exceeding 100 per cent of fixed remuneration do not apply to the Bank.

In applying this Remuneration Policy, the Board and the Remuneration Committee seek to ensure that at all times the remuneration of staff is aligned with the interests of the Bank’s shareholders and does not conflict with the interests of its clients. No person in the Bank is involved in setting their own remuneration.

2. Remuneration Code Staff

A risk assessment is undertaken annually by the Bank and material risk takers are identified along with colleagues who are classed as Senior Managers within the Senior Management and Certification Regime (SMCR) as “Remuneration Code Staff”. Also included are colleagues receiving total remuneration which takes them into the same remuneration bracket as senior management and risk takers, whose professional activities have a material impact on the Bank’s risk profile.

As required by our regulators, the Bank will maintain a record of Remuneration Code Staff and ensure that these colleagues understand the implications of their status, including the potential for remuneration which does not comply with certain requirements of the Remuneration Code to be rendered void and recoverable by the Bank.

Al Rayan Bank recognises the need to recruit and retain well motivated individuals to work for the Bank. How colleagues are engaged, appraised, trained and motivated plays a key part in the culture of fairness and consequently the fair treatment of customers. To achieve this aim, the Bank will provide a competitive remuneration package commensurate with businesses of a similar size and nature. The package will be clear and unambiguous, allowing colleagues to understand how their role is positioned in the structure and how the payment element and any additional performance element is earned, with clear objectives being set and feedback subsequently provided by the colleague’s manager.

The overall remuneration package is designed to promote sound and effective risk management which does not promote excessive risk taking. It consists of a number of elements including:

2.1 Basic Salary

Salary levels are set with reference to independent salary surveys, primarily the Towers Watson Financial Services Compensation Report which is produced annually.

Independent data is reviewed against job descriptions for each role and the salary banding is then determined, which includes lower, median and upper quartile pay information.

All salary bandings are determined by the HR team in consultation with the hiring senior manager. Salary offers for all roles must be within the market range determined by the HR team’s assessment of the role, with reference to market data. Executive hires are referred to the Remuneration Committee for approval.

The Bank will seek to pay basic salary levels with reference to the market median for basic salaries (excluding any performance element) for financial services businesses based on regional data . Where specific roles are deemed key to achieving strategic objectives or are in high demand, the Bank may be required to pay a salary above median. This will be approved in advance by the HR Committee, including the CFO for budgeting purposes.

The bank operates a grading structure for all roles, as set out in the Employee Grade Guidelines.

[Basic salary typically makes up a substantial proportion of each employee’s total remuneration with the Bank and is intended to be of a sufficiently high proportion that the Bank can operate a fully flexible policy in relation to performance bonuses and award no performance bonuses to employees where appropriate.]

2.2 Performance Bonus

In addition to basic pay, all colleagues participate in an additional discretionary reward structure specifically linked to the Bank’s performance, their departmental performance and their own personal performance. Colleagues employed on or before 1 October in the year will be eligible to participate in the discretionary bonus scheme (bonus payment will be pro rata for new joiners to reflect length of service).

The discretionary annual bonus will be paid from an overall budget that is made available by the Remuneration Committee based on the Bank’s performance against financial metrics. Further weighted metrics relating to financial targets, customer service, risk management and performance against strategic goals are then applied to determine the % of the overall budget that will be payable. Management’s assessment of these factors is moderated and approved by the Remuneration Committee. Individual bonus awards are made based on individual performance ratings and team performance ratings. A consistent formula is used to determine bonus levels for colleagues and management. The Remuneration Committee oversees the application of the formula. Heads of Department and Executive bonuses are individually reviewed and approved by the Remuneration Committee.

In some departments there is a separate small incentives scheme. Small incentive schemes are designed to require colleagues to demonstrate the right behaviours, conduct and risk management standards, in line with the Bank’s values. If colleagues meet the threshold for evidencing the Bank’s behaviours, risk and conduct standards, then small payments may be made on a quarterly basis to reward service and sales performance. These payments will be proposed and moderated by the department management and approved by the line Executive.

The reason for this additional enhancement is two-fold. Firstly, to ensure all colleagues have the opportunity to understand the key objectives of the Bank and how successful it is in meeting its objectives. Secondly, it provides an invaluable opportunity for colleagues to review their individual performance and training needs with their own Manager and the impact and contribution towards departmental objectives. For Remuneration Code Colleagues, an element of the bonus may be deferred.

The framework underpinning the performance bonus scheme is designed to ensure a cross section of performance metrics are taken into account to ensure the scheme does not result in inappropriate behaviour and that no one factor, e.g. sales volumes, is the sole determinant of performance. Colleagues will be recruited on the basis of the availability of a performance bonus; however the objectives and performance metrics of the scheme may vary from one year to the next, including the potential for deferred bonus at the discretion of the Remuneration Committee in order to account for future risks.

Bonuses are not guaranteed with payment being made subject to satisfactory individual, departmental and corporate performance. All bonus schemes are approved at a local level by the Executive, Compliance and HR Committee to ensure that they align with the Bank’s strategy, objectives, values and long term interests and to ensure that are no potential conflicts of interest within any elements of remuneration. The Executive may recommend bonus schemes to the Remuneration Committee for approval.

The individual performance element is independent of the overall company performance element. It is set in conjunction with colleagues and their Manager and is reviewed to ensure that the individual’s metrics are in keeping with the objectives of the Bank. Colleagues in control functions will not be set objectives that directly link to the profitability of the business units they support. A consistency checking process is undertaken by the HR Committee and is reviewed by the Executive Committee with input from managers as required to ensure that any bonus awards are fairly distributed. Although the Bank is a proportionality level 3 firm, it is the Bank’s policy that the ratio of bonus to base salary will not exceed 1:1.

Due to the wide variety of performance metrics under this Scheme, it is considered suitable for participation by colleagues engaged in SMCR in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control.

Bonuses are discretionary and will only be paid if they are sustainable according to the financial situation of the Bank as a whole and justified on the basis of the Bank’s performance, the business unit and the individual concerned.

All bonuses are subject to claw back for a period of 7 years from the date on which it is awarded where an employee participated in or was responsible for conduct which resulted in significant loss to the Bank or where the employee failed to meet appropriate standards of fitness and propriety.

3. Other Benefits

Detailed below is a high-level summary of other benefits available to colleagues.

3.1 Share Options

From time to time, the Bank may operate a Company Share Option Plan (‘CSOP’) under which options to subscribe for the Bank’s ordinary shares are awarded to certain Colleagues. Options may be awarded to Senior Management on a discretionary basis and subject to the achievement of specific performance criteria as determined by the Remuneration Committee.

3.2 Pension Scheme

The Bank has a Sharia compliant Company Pension Scheme which is suitable for auto enrolment purposes. All colleagues are encouraged to invest for their future. The Bank will also match contributions made by each employee up to certain levels/percentages dependent upon the colleague’s level of seniority. This will form part of the overall remuneration package in assessing salaries against benchmark data.

The Bank’s pension policy is line with its business strategy, objectives, values and long-term interests. [It is not the Bank’s policy to pay discretionary pension benefits to employees on retirement.]

3.3 Holidays

Colleagues at employee grade are eligible for 25 days holiday per year and colleagues at manager grade or above are eligible for 27 days holiday. Colleagues are also eligible for UK Bank Holidays. Holiday eligibility increases with length of service up to a maximum of 30 days per year.

3.4 Car Allowance

Head of Departments and Executives grades are eligible for a car allowance. The benefit is non-contractual and varies dependent on level.

At the Bank’s discretion, roles that fall out of the above grades can receive car allowance if it is necessary for the performance of the role. This will be determined by the HR Committee at the vacancy approval stage.

3.5 Life Assurance

From commencement of employment, all colleagues receive Life Assurance cover at a rate of 4 times basic annual salary.

3.6 Private Health Insurance

Colleagues are offered membership of a Private Health Insurance Plan paid for by the Bank, which includes dental and optician cover. This is a taxable benefit available to colleagues after successful completion of probation. Manager grade colleagues may add family members to the scheme.

3.7 Government Tax Efficient Schemes

Wherever possible, the Bank will facilitate access to any tax efficient schemes provided they do not conflict with the objectives of the Bank. Currently the Bank facilitates a salary sacrifice childcare voucher scheme and salary sacrifice option on its pension scheme.

3.8 Hiring Bonuses

The Bank does not award, pay or provide guaranteed bonuses except in exceptional cases when hiring new staff. In such circumstances, such awards are limited to the relevant employee’s first year of service and are only made where the Bank is satisfied that it has a strong and sound capital base.

3.9 Severance Packages

The Bank understands that it must ensure that payments related to the early termination of an employee’s contract of employment reflect performance achieved over time and are designed in a way that does not reward failure.

The Bank does not have an enhanced severance policy and the contracts of its employees do not provide for payments on termination other than payments in lieu of notice which can be made at the Bank’s discretion.

Any severance payments paid to employees are generally intended to reflect the employee’s contractual and statutory entitlements and are not determined in such a way that they reward failure or poor performance.

3.10 Disturbance Allowances

The Bank may offer disturbance allowances to senior colleagues relocating for a new role, at the discretion of the CEO.

4. Waivers and Breaches of the Remuneration Policy

The requirements of this policy cannot be waived without the express permission of the Board.

Breaches of this policy must be identified, reported and managed according to Bank’s

Breach policy and regulatory requirements.

Any significant breaches of the Remuneration Codes will be notified to the regulators.

5. Sharia Compliance Statement

The Bank operates within Sharia principles and all colleagues are to be vigilant in their practices to ensure that all their actions, as a colleague of the Bank, do not conflict with Sharia principles and do not undermine these principles in any way. If colleagues are in doubt, then they must seek guidance from their line manager or alternatively from the Head of Sharia Compliance & Product Development.

All colleagues will be responsible for reporting to their line manager any procedure or activities that might have an impact on the Bank’s compliance with Sharia. 

6. Review of Policy

This policy will be reviewed regularly, at least once a year, and amended as considered necessary by Bank’s Board in the event of changing circumstances or regulations.

7. Change History

Version & Date Status Comments

  • December 2009 LIVE Initial version
  • 16 October 2018 DRAFT Policy rebranded, car allowance and disturbance allowance included