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Home / Latest News / £2m bonus deal approved for Network Rail directors despite union criticism

£2m bonus deal approved for Network Rail directors despite union criticism

Network Rail members have approved a fresh lucrative bonus package for its top directors – despite fierce criticism from unions about the firm’s performance.

The move will see five executives share a pot of £2m – officially called the Long Term Incentive Plan – which will only be paid out if key targets are met by 2015.

But should bosses meet those goals, they will scoop the windfall on top of their six figure salaries and an annual scheme worth up to £1.236m.

Network Rail’s 44 members, the equivalent of shareholders, backed the long term bonus at its meeting in Cardiff today – despite being urged by protesters outside to vote against the scheme.

The Transport Salaried Staffs Association’s (TSSA) described the decision as “rewarding failure” amid concerns about service punctuality, rising train fares and a number of rail-related deaths.

But Network Rail chairman Richard Parry-Jones, who is not entitled to the bonus package, insisted the firm had made exceptional progress over the past 12 months.

He said challenges facing the organisation have been passenger numbers rising to 1.5 billion on a network and carrying out £4.4bn worth of improvement on a “Victorian” rail network.

“We have had another solid year of progress and we intend to continue on this path,” he added.

“Network Rail executives are rewarded only when exceptional performance exceeds tough targets, which have been approved by our members through an open and transparent process.

“If targets are not met, or safety comprised, no bonuses are made.”

Network Rail’s five executive directors are appointed by the organisation’s 44 members.

Chief executive David Higgins is the firm’s top earner with his £577,000 salary, followed by finance director Patrick Butcher on £394,000 and the £371,000 annual wages of operations manager Robin Gisby and projects boss Simon Kirby.

The lowest earner of the five is strategy director Paul Plummer, who earns £348,000 per annum.

As well as their salaries, the directors are also entitled to two generous bonus packages.

The first is an annual scheme which pays bosses an additional 60% of their salary.

This is only paid out if Network Rail meets targets on punctuality as well as train company and passenger satisfaction.

With targets missed last time around, execs received 17% of the bonus in addition to their pay.

Its second bonus package pays five bosses up to 100% of their salary if they meet targets on efficiency savings, train punctuality and completing work on time.

The total package is worth a total of £2m – and only is paid out in 2015 if targets are met.

If the goals are not met, then it can result in a lower or no payout.

Any of the five execs who leaves or is removed from their post in the next three years will automatically lose the perk.

Last year, following political pressure, bosses waived a bonus package and instead allocated their windfall to a safety improvement programme – which has seen Network Rail placed in the spotlight following a series of high profile incidents.

Earlier this year, Network Rail was handed a £450,000 fine for failing to ensure the safety of 52-year-old Jane Harding killed who was killed when her car was hit by a train at a level crossing in Herefordshire, in January 2010.

Network Rail’s Australian-born chief executive Mr Higgins told members at its annual meeting that 750 crossings had been closed.

“In my opinion, the only good level crossing is a closed one,” he added.

Mr Higgins also conceded that more could have been done to prevent the death of 26-year-old rail worker Scott Dobson, who died after being hit by a train near Lincoln last December.

He said the company had launched a safety “10- point plan” that also looked to reduce accidents involving workers and contractors.

And one risk area that would have be examined, he said, was travelling to and from work with some contractors experiencing fatigue.

Members were also given the low-down on Network Rail’s finances by South African-born director Patrick Butcher.

He told the meeting that turnover had risen by 3%, but operating costs had increased by £74m.

Also, net debt had increased by £3.bn.

According to projections by the Office of Rail Regulation, Network Rail’s debt will have increased from £20bn to almost £50bn by 2020.

After three hours of discussions, members took a vote on 22 resolutions for the firm.

As well as reappointing its board of directors, its five executive directors had their bonus scheme implemented by a majority of 86%.

TSSA’s general secretary Manuel Cortes said the union was bitterly disappointed by the plan.

He said: “Once again, public members of Network Rail have put the interests of bosses ahead of passengers.”

“These bosses will be on board a very lucrative gravy train while the poor passengers pay through the nose with annual above-inflation fare rises.”

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