What is the Remuneration Committee Guide?
In July 2025, the Quoted Companies Alliance (QCA) published the latest Remuneration Committee Guide (the "2025 Guide"). The guide is designed to support the QCA Corporate Governance Code and sets a framework for best practice in relation to the remuneration of quoted companies. We summarise the key changes that you should be aware of as a small to mid-size quoted company.
Key changes: culture, ESG and performance metrics take centre stage
Building on the previous version published in 2020 (the "2020 Guide"), the July 2025 Guide emphasises that remuneration structures should strive to find a balance between both financial and non-financial performance measures. This includes the growing expectation for environmental and social metrics to be included in the assessment where these represent material risks and opportunities.
The substantive changes can be grouped into three key areas of focus:
- the importance of ESG
- aligning remuneration policies with the culture of the company
- effective Long-Term Incentive Plans (LTIPs).
Enhanced ESG integration
The 2025 Guide expands upon the 2020 Guide's existing ESG framework. Companies are now expected to identify material ESG risks and opportunities, link these meaningfully to executive pay structures and provide transparent disclosure of their ESG remuneration practices.
The 2025 Guide includes detailed performance indicator tables covering everything from emissions reduction and biodiversity impact to diversity initiatives and supply chain management.
This shift in focus reflects the fact that ESG factors are no longer optional considerations but essential components of effective remuneration structures for forward-thinking AIM and AQSE companies.
Culture matters
In the 2025 Guide, we see an enhanced emphasis on culture as a strategic driver, building upon the 2020 Guide's existing cultural alignment principles.
Moving beyond the 2020 Guide's basic requirement that remuneration policies should be "consistent with the culture of the company", the 2025 Guide highlights the importance of rewarding and incentivising employees in a way that reinforces appropriate behaviours and discourages behaviours that might harm consumers and markets.
This acknowledges that poorly designed incentives can inadvertently encourage damaging behaviours that undermine both company values and broader stakeholder interests.
Getting long term incentives right
The 2025 Guide introduces enhanced governance requirements and tightens vesting thresholds.
The 2025 Guide adjusts threshold vesting to a maximum of 20-25% compared to the 2020 limit of 25%. It also emphasises simplified design principles to avoid "conflicting or ineffective incentives". Additionally, enhanced risk management frameworks now require performance metrics to align with company strategy and risk tolerance.
It also strengthens the guidance in relation to adjusting vesting levels, advising that adjustment should only occur in "exceptional cases" where the level of award and the shareholder experience are "significantly unaligned". Furthermore, the 2025 Guide increases shareholder engagement as companies are advised to seek shareholder approval when introducing long-term equity plans or making significant amendments to existing plans.
These core mechanics remain consistent with the 2020 Guide, but the 2025 Guide provides more detailed guidance on committee discretion, shareholder engagement and strategic alignment.
Other significant changes: QCA Corporate Governance Code
The guide supports the Corporate Governance Code (the "Code"), which is the overarching set of principles aimed at strengthening connections between companies, their investors and wider stakeholders. The latest Code, published in November 2023, applies to accounting periods starting on or after 1 April 2024 and companies were granted a 12-month transition period to adjust to the new principles, so companies are only starting to adopt it now.
The Code has not significantly changed and still includes 10 principles of corporate governance, however, there is a new principle on remuneration. The new remuneration principle calls on companies to implement a remuneration policy which supports long-term value creation and aligns with the company's purpose, strategy and culture. Importantly, it also brings into scope of the code, the requirement for shareholders to vote on the directors' remuneration report and policy, as well as any new or material changes to existing share plans. The Code now expressly states that companies should put their annual directors' remuneration report to an advisory shareholder vote, and their policy should be put to 'at least' an advisory vote (i.e. non-binding).
In addition, the updated code specifies that any new or material changes to existing share schemes or long-term incentive plans should be approved by shareholders.
Whilst the shareholder voting requirements were previously contained in the QCA's Remuneration Committee Guide, moving them into the Code underscores an expectation that companies adopting the Code should seek shareholder approval for remuneration reports, policies, and significant changes to their share plans.
Other changes include more emphasis on culture and ESG, in particular environmental responsibility, with risk assessment and disclosure requirements. Updates for board governance include an assessment of diversity and, whilst no diversity targets have been set, boards should ensure that they are sufficiently diverse to allow for the "best decision-making process".
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Claire Matthews, Partner at Taylor Wessing, and the Incentives team advise companies on their employee incentives, including their alignment with the QCA codes, guides and investor best practice, to ensure incentives are effective and operate smoothly throughout the corporate lifecycle.
