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Payroll costs, share based payments and management incentive schemes | 12 Months Ended
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Dec. 31, 2021
Employee Benefits And Share-Based Payments [Abstract] |
Payroll costs, share based payments and management incentive schemes | Payroll costs, share based payments and management incentive schemes (a)Payroll costs The average number of persons employed by the Company (excluding non-Executive Directors) is analyzed and set out below:
| Year ended December 31, 2021 |  | Year ended December 31, 2020 |  | Year ended December 31, 2019 |  |  |  |  |
Production | 3,310 |  |  | 3,043 |  |  | 3,308 |  |  |  |  |  |
Administration, distribution & sales | 2,193 |  |  | 1,647 |  |  | 1,448 |  |  |  |  |  |
Total number of employees | 5,503 |  |  | 4,690 |  |  | 4,756 |  |  |  |  |  |
The increase in the average number of employees in the table above for the year ended December 31, 2021 compared with the year ended December 31, 2020 is primarily due to the Fortenova Acquisition and Findus Switzerland acquisition as described in Note 14. The table below discloses the Company’s aggregate payroll costs of these persons. Payroll costs exclude long term management incentive scheme and share based payment costs, but includes bonus costs.
| Year ended December 31, 2021 |  | Year ended December 31, 2020 |  | Year ended December 31, 2019 |  |  |  |  |
| €m |  | €m |  | €m |  |  |  |  |
Wages and salaries | 266.4 |  |  | 276.4 |  |  | 250.4 |  |  |  |  |  |
Social security costs | 56.1 |  |  | 49.2 |  |  | 45.2 |  |  |  |  |  |
Other pension costs | 18.1 |  |  | 14.6 |  |  | 13.0 |  |  |  |  |  |
Total payroll costs | 340.6 |  |  | 340.2 |  |  | 308.6 |  |  |  |  |  |
(b)Share based payments The Company's discretionary share award scheme, the LTIP, enables the Company’s Compensation Committee to make grants (“Awards”) in the form of rights over ordinary shares, to any Director, Non-Executive Director or employee of the Company. However, it is the Committee’s current intention that Awards be granted only to Directors and senior management, whilst recognizing a separate annual Restricted Stock Award for Non-Executive Directors. All Awards are to be settled by physical delivery of shares. Non-Executive Director Restricted Share Awards In accordance with the Board approved independent Non-Executive Director compensation guidelines, each independent Non-Executive Director is entitled to a grant of $100,000 of restricted shares annually on the date of the annual general meeting, valued at the closing market price for such shares on this date. The restricted shares vest on the earlier of twelve months from the date of grant or the date of the Company’s next annual meeting of shareholders. The Non-Executive Directors restricted share awards granted on June 19, 2018, which consisted of 32,172 shares at a share price of $18.07, vested on June 14, 2019 and were issued at a share price of $20.74, resulting in a €0.1 million increase in the share based compensation reserve. Of the total 44,272 number of shares vesting, 12,100 shares were held back from issue by the Company as settlement towards personal tax liabilities arising on the vested shares. The Non-Executive Directors restricted share awards granted on June 14, 2019, which consisted of 39,370 shares at a share price of $20.32. In July 2019, in conjunction with the resignation of one of our Non-Executive Directors, 2,460 shares from this grant were vested and issued. The remaining awards vested on June 17, 2020 and were issued at a share price of $21.78. Of the total 34,447 number of shares vesting, 8,656 shares were held back from issue by the Company as settlement towards personal tax liabilities arising on the vested shares. The Non-Executive Directors restricted share awards granted on June 17, 2020, which consisted of 32,140 shares at a share price of $21.78, vested on June 30, 2021 and were issued at a share price of $30.14, resulting in a €0.2 million increase in the share based compensation reserve. Of the total 32,140 number of shares vesting, 7,734 shares were held back from issue by the Company as settlement towards personal tax liabilities arising on the vested shares. On June 30, 2021, after the Company's annual general meeting of shareholders, the current Non-Executive Directors were granted 24,759 restricted share award at a share price of $28.27. The total charge for Non-Executive Director grants within the Statement of Consolidated Profit or Loss for the year ended December 31, 2021 for stock compensation awards was €0.8 million (year ended December 31, 2020: €0.7 million; year ended December 31, 2019: €0.9 million). Director and Senior Management Share Awards As part of its long term incentive initiatives, the Company has outstanding awards over 2,016,855 ordinary shares granted to certain members of its management team (the “Management Share Awards”) as of the following four award dates:
| January 1, 2016 Award |  | January 1, 2017 Award |  | January 1, 2018 Award |  | January 1, 2019 Award |  | January 1, 2020 Award |  | January 1, 2021 Award |  | Total
Number of awards outstanding at January 1, 2021 | 1,041,953 |  |  | 819,873 |  |  | 446,575 |  |  | 159,561 |  |  | 710,438 |  |  | — |  |  | 3,178,400 |
New awards granted in the period | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 820,202 |  |  | 820,202 |
Awards vested and issued in the period | (1,041,953) |  |  | (819,873) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,861,826) |
Forfeitures in the period | — |  |  | — |  |  | (14,785) |  |  | (6,866) |  |  | (65,345) |  |  | (32,925) |  |  | (119,921) |
Number of awards outstanding at December 31, 2021 | — |  |  | — |  |  | 431,790 |  |  | 152,695 |  |  | 645,093 |  |  | 787,277 |  |  | 2,016,855 |
The 2018 award has vesting conditions based on cumulative EBITDA performance over four years and Company share price performance over two years to five years. During 2021, the Compensation Committee of the Board of Directors amended the non-market condition targets for this award due to recent acquisitions, which did not increase its incremental fair value. The share price and EBITDA performance conditions for the 2018 award are weighted 50% each per performance target. •For the 2018 award, for the share price target, the initial two-year period was through to January 1, 2020 and the subsequent three-year period is through to January 1, 2023. For the four-year cumulative EBITDA Performance Condition, if satisfied, will vest on January 1, 2022. For the 2019, 2020 and 2021 awards, those grants have vesting conditions based on cumulative EBITDA performance, cumulative Net Sales and Company share price performance over three years. During 2021, the Compensation Committee of the Board of Directors amended the non-market condition targets for these awards due to recent acquisitions, which did not increase their incremental fair value. In addition, the 2020 award had a holding period of one-year that has been removed from the vesting period. The 2021 award was issued late in 2021 with a performance period starting January 1, 2021. In September 2019, 166,427 restricted share awards were granted as part of the 2019 Management Share Award. The performance period associated with the award began as of January 1, 2019. The 2019 awards have vesting conditions based on three-year cumulative EBITDA and net sales, and Company share price performance measures. One third of the total share award is assigned to each type of performance measure. All shares are subject to a holding period of an additional year and require that the participants to the scheme are still actively employed during the entire four year period, through January 1, 2023. In January 2020, 761,979 restricted share awards were granted as part of the 2020 Management Share Award. The performance period associated with the award began on January 1, 2020. The Share awards will vest on the Company achieving a range of performance conditions including cumulative EBITDA, cumulative net sales, and share price performance measures over a three-year period. The cumulative EBITDA and Cumulative Net Sales tranches of shares are equally weighted, being worth 37.5% of the total award each. The Company Share Price Tranche is worth 25% of the total award. All shares vest, subject to satisfaction of the award conditions, on January 1, 2023. In late 2021, 820,202 restricted share awards were granted as part of the 2021 Management Share Award. The performance period associated with the award began on January 1, 2021. The Share awards will vest on the Company achieving a range of performance conditions including cumulative EBITDA, cumulative net sales, and Company share price performance measures over a three-year period. The cumulative EBITDA and Cumulative Net Sales tranches of shares are equally weighted, being worth 37.5% of the total award each. The Share Price Tranche is worth 25% of the total award. All shares vest, subject to satisfaction of the award conditions, on January 1, 2024. In January 2019, 85,315 restricted shares granted as part of the 2017 Management Share Awards vested based on share price performance, resulting in the issuance of 51,932 ordinary shares (net of 33,383 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). In January 2020, 284,555 restricted shares granted as part of the 2016 Management Share Awards vested as a result of the satisfaction of the applicable Share Price Performance Condition (based on a share price of $22.37), resulting in the issuance of 163,816 ordinary shares to participants in the LTIP (net of 120,739 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). In February 2020, 1,626,006 restricted shares granted as part of the 2016 Management Share Awards vested as a result of the satisfaction of the applicable Share Price Performance Condition (based on a share price of $19.53), resulting in the issuance of 928,042 ordinary shares to participants in the LTIP (net of 697,964 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). In September 2020, 42,825 restricted shares granted as part of the 2018 Management Share Awards vested as a result of the satisfaction of the applicable Share Price Performance Condition (based on a share price of $25.30). Due to the timing of the vesting, the resulting issuance of 25,655 ordinary shares to participants in the LTIP (net of 17,170 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares) occurred in October 2020. In January 2021, 1,041,953 restricted shares granted as part of the 2016 Management Share Awards vested as a result of the satisfaction of the applicable Share Price Performance Condition (based on a share price of $25.42), resulting in the issuance of 587,633 ordinary shares to participants in the LTIP (net of 454,320 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). In January 2021, 368,154 restricted shares granted as part of the 2017 Management Share Awards vested as a result of the satisfaction of the applicable Share Price Performance Condition (based on a share price of $25.42), resulting in the issuance of 217,228 ordinary shares to participants in the LTIP (net of 150,926 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). In February 2021, 451,719 restricted shares granted as part of the 2017 Management Share Awards vested as a result of the satisfaction of the applicable EBITDA Performance Condition (based on a share price of $25.89 at time of vesting), resulting in the issuance of 271,451 ordinary shares to participants in the LTIP (net of 180,268 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). The stock compensation charge reported within the Consolidated Statement of Profit or Loss for the year ended December 31, 2021 related to the director and senior management share awards is €4.3 million (year ended December 31, 2020: €8.3 million: year ended December 31, 2019: €14.0 million). The Company calculates the cost of the Management Share Awards based upon their fair value using the Monte Carlo Model, which is considered to be the most appropriate methodology considering the restricted shares only vest once the market performance conditions have been satisfied. The inputs and assumptions underlying the Monte Carlo models for all awards outstanding as of the valuation date are now as follows:
|  |  | January 1, 2018 award | January 1, 2019 award | January 1, 2020 award | January 1, 2021 award
Grant date price |  |  | $ | 16.72 |  | $ | 20.15 |  | $ | 22.37 |  | $ | 25.42 |
Exercise price |  |  | $ | — |  | $ | — |  | $ | — |  | $ | — |
Expected life of restricted share |  |  | 1.50 - 4.00 years | 4.00 years | 3.00 years | 3.00 years
Expected volatility of the share price |  |  | 22.7 | % | 24.0 | % | 24.4 | % | 30.0 | %
Dividend yield expected |  |  | — | % | — | % | — | % | — | %
Risk free rate |  |  | 2.55 | % | 1.33 | % | 1.70 | % | 0.24 | %
Employee exit rate |  |  | 14.0 | % | 14.0 | % | 27.3 | % | 14.0 | %
EBITDA Performance Target Condition |  |  | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | %
The expected volatility of the share price inputs above were estimated by referencing selected quoted companies which are considered to exhibit some degree of comparability with the Company, as the Company has only been listed for approximately six years. Based on the latest assessments of fair value and the number of shares expected to vest, the total fair values in respect of the Restricted Shares are: •2018 award - $1.6 million (€1.3 million) •2019 award - $1.4 million (€1.2 million) •2020 award - $4.8 million (€4.3 million) •2021 award - $7.0 million (€5.8 million) Initial Director Options In 2014, certain Non-Executive Directors were granted options (“Initial Options”) to purchase a maximum of 125,000 Ordinary Shares at an exercise price of $11.50 per ordinary share. The awards were valued at issuance and expensed during the two years ended April 1, 2016. Throughout 2019, former Non-Executive Directors exercised 56,250 of the 125,000 initial options granted to them for €0.6 million. In May 2020, former and current Non-Executive Directors were issued an aggregate of 49,196 shares (net of shares withheld for the settlement of taxes), exercising all the remaining initial options outstanding for €0.6 million.

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