Report of the Remuneration Committee

This report has been prepared in accordance with Schedule 7A to the Companies Act 1985. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles of good governance relating to Directors' remuneration. Shareholders will be invited to approve the report at the Annual General Meeting of the Company to be held on 23 July 2009.

Remuneration Committee1

The Company has established a Remuneration Committee ('the Committee') which is constituted in accordance with the recommendations of the Combined Code. The current members of the Committee, all of whom are independent Non-Executive Directors. The Chairman of the Committee is Mr R J Harrison OBE. The Group Company Secretary acts as its secretary. The terms of reference for the Committee can be found on the Corporate Governance section of our website at www.bssgroup.com.

The role of the Committee is to decide on all aspects of the remuneration packages of the Executive Directors and the Chairman. The remuneration of the Non-Executive Directors is a matter to be agreed between the Chairman and the Group Chief Executive. The Committee reviews and retains a right of veto on all aspects of remuneration for all direct reports of Executive Directors and all members of the senior management team.

Remuneration Policy1

The Group aims to provide competitive salary and benefit packages for all employees. As far as is practicable it pursues a consistent policy of terms and conditions across the Divisions. In that context benefits such as share options and pension scheme membership are open to all qualifying employees.

In assessing all aspects of pay and benefits, comparison is made with the packages offered by companies of similar size and business diversity and after considering general pay and employment conditions in the Group. The Committee has access to New Bridge Street Consultants LLP, who as independent consultants, provide external research on market data and trends. In order to align individual's rewards with the Company's performance, annual bonuses and share incentive schemes are linked to the Company's strategy and determined by levels of performance achieved against key targets.

Executive Directors1

The Committee aims to ensure that remuneration packages are competitive and designed to attract, retain and motivate the Executive Directors to maintain the profitable growth of the business. As far as possible, it is the Committee's intention to align Executive Directors' interests with those of the shareholders.

The main elements of the remuneration package for Executive Directors are as follows:

The Group's policy is that a substantial proportion of the remuneration of the Executive Directors should be performance related. The targeted composition of each Executive Director's annual remuneration is for performance related remuneration to be more than 50% of the total.

During the year the Committee reviewed the following areas of the senior management's remuneration in light of the current economic conditions.

Basic Salary1

Basic salary for each Executive Director is determined by the Committee annually after a review of individual performance and having regard to competitive practice. Pay rises take effect from 1 April each year unless an individual changes role, when pay changes take effect from the date of change. All Executive Directors received pay rises on 1 April 2008 after review by the Remuneration Committee against benchmark data for other market sector companies and taking into account the sustained growth and performance of the business which has doubled its turnover over the last five years.

All employees and Directors pay increases effective from 1 April 2009 were individually determined based upon their own performance and are typically within a range of 0 to 5%.

Benefits in Kind1

The Executive Directors receive certain benefits in kind, which in the main relate to the provision of a company car.

Annual Bonus Scheme1

All of the Executive Directors are eligible to participate in a short term incentive scheme for which targets are set annually by the Remuneration Committee. The targets are designed to encourage individual performance, operating efficiencies and profitable growth. During 2008/09 these related to improvements in profit before taxation after allowance for bonuses (90% of basic salary) and the achievement of working capital targets (10% of basic salary).

Mr A Ball's targets differ to Mr G Slark and Mr J R Murray as he is also a managing director of a division of the Group (PTS). 65% of basic salary is based upon improvements in profit before taxation after allowance for bonuses for the Group and another 30% of basic salary is based upon this metric but just for PTS. The final 5% of basic salary is based upon improvements in own brand sales growth. Therefore the maximum payable under the scheme during 2008/09 was 100% of basic salary. For the financial year 2009/10, the maximum payable under the scheme will again be 100%. The targets for 2009/10 are again based upon the achievement of working capital targets (10% of basic salary) and profit before taxation after allowance for bonuses and as above for Mr A Ball. The profit before taxation is based upon growth above the budgeted profit before taxation for the Group. Bonuses earned are paid out in June following the announcement of the results for the financial year.

The targets for the 2008/09 scheme were not achieved for the profit before taxation element of the award, due to the decline in the economic environment that the Group trades in. Mr G Slark and Mr J R Murray will receive 9% of basic salary each based upon achievement of working capital targets. Mr A Ball will receive 9% of basic salary based upon growth in the own brand sales of PTS.

Pension Arrangements1

In line with the Group policy all new Executive Directors are eligible to join The BSS Group plc Group Stakeholder Pension Plan. The BSS Group plc Pension and Life Assurance Scheme, which Mr G Slark is a member of, is now closed to new members. The scheme provides a pension on normal retirement at age 62 based upon a maximum accrual rate of 1/75th of pensionable earnings for each completed year of service. Early retirement is possible from age 55 with a reduced pension if the Company agrees.

Share Incentive Schemes1

All of the Executive Directors participate in long term incentive schemes, details of which are set out below. The share option schemes are reviewed annually to ensure the grant level, performance conditions and vesting schedules remain appropriate and will align the interests of the participants with the shareholders.

There were two long term incentive schemes in operation during the year; The BSS Group plc Performance Share Plan and The BSS Group plc Approved and Unapproved Share Option Scheme. The BSS Group plc Approved and Unapproved Share Option Scheme final grant of options matured on 1 June 2007; there are no future plans to grant options under this scheme.

The BSS Group plc Performance Share Plan1

The BSS Group plc Performance Share Plan (the 'Plan'), was first approved at the Annual General Meeting on 21 July 2005. This plan is used as a means of incentivising senior management and Executive Directors, to maintain the profitable growth of the Company such that their interests continue to be aligned with those of the shareholders. The maximum number of shares granted to any Director in any one year is equivalent to one year of basic salary.

The Plan is structured to reward performance where the Group achieves strong growth in earnings per share ('EPS') in excess of growth in the Retail Prices Index ('RPI'). The fourth award under the Plan was made on 20 June 2008; performance for this award will be measured over three financial years ended 31 March 2009, 31 March 2010 and 31 March 2011. The share price on the date of grant was 338.0p.

The principal features of the Plan are as follows:

With a view to linking rewards to performance, average EPS growth per annum for the awards made shall result in vesting as follows:

Growth in EPS (average per annum) over RPI Vesting
Less than 5% EPS No part of the award will vest
Between 5% and 10% (inclusive) Straight line proportionate vesting between 30% and 100% (inclusive)
More than 10% EPS 100% of the award will vest

The 100% vesting EPS targets for the previous three years grants are shown in the table below. Where RPI information is not available yet a rate of 3% has been assumed.

June 2006 grant   June 2007 grant   June 2008 grant
Target Actual   Target Actual   Target Actual
Initial EPS 21.000p n/a   27.100p n/a   33.300p n/a
March 2007 25.021p 27.100p   n/a n/a   n/a n/a
March 2008 28.556p 33.300p   30.929p 33.300p   n/a n/a
March 2009 32.263p 33.300p   34.944p 33.300p   37.622p 33.300p
March 2010 n/a n/a   39.487p n/a   42.513p n/a
March 2011 n/a n/a   n/a n/a   48.040p n/a
Cumulative 85.840p 93.700p   105.360p n/a   128.175p n/a

The 2006 grant under the Scheme has vested at 100% and all Directors with interests in this grant will be eligible to receive their shares.

The terms for the 2009 grant will be to target growth in profit before taxation of over 10% above RPI based upon the budget profit before taxation for financial year 2009/10. The same proportionate vesting from average growth per annum between 5% and 10% growth over RPI will be applied as targets for each of the three years during the life of the grant.

There have been no variations to the terms and conditions or performance criteria for existing grants of share options during the year.

Dilution1

Newly issued shares are currently used to satisfy the exercise of all employee and Executive share options. Grants of shares for the Performance Share Plan are satisfied by shares delivered from the Employee Benefit Trust which are bought from the Company using funding from the Company.

In accordance with the ABI guidelines, the Company can issue a maximum of 10% of its issued share capital in a rolling 10 year period to employees under share plans. Within this 10%, the Company can only issue 5% to satisfy awards under discretionary Executive plans.

Save-As-You-Earn ('SAYE')1

Executive Directors may participate in an Inland Revenue approved SAYE scheme which is open to all employees.

Details of Directors' interests including share options are shown below.

Share Performance Graph1

The following graph compares the total return performance based on share price movements of the Group rebased against the total return of the FTSE 250 index over the five year period to 31 March 2009. As there are no directly comparable competitors in terms of size, demographic spread or activities, the FTSE 250 Index has been chosen as being a broad equity market index consisting of companies comparable in size to The BSS Group plc.

Share Performance Graph

Source: DataStream

Executive Directors' Contracts1

It is The BSS Group plc policy that Executive Directors' service contracts should be one year rolling contracts with notice periods of not more than one year. Contractual termination payments should not exceed one year's remuneration, including bonuses, pension contributions, share options as felt appropriate by the Board dependent on the length of service completed in the year of termination.

All Executive Directors have service contracts. All are one year rolling contracts which provide for notice periods of 6 months by the Director and 12 months by the Group.

Contract dates for each Director are as follows:

G Slark 3 January 2006; J R Murray 2 May 2006; A Ball 27 November 2006.

Executive Directors, subject to Board approval, may hold an external non-executive directorship of businesses that do not compete with The BSS Group plc. No such appointments are currently in place. Directors may retain payments received in respect of these positions.

Non-Executive Directors1

The remuneration of the Non-Executive Directors is determined by the Chairman and Group Chief Executive. Non-Executive Directors' remuneration is all non performance related. Non-Executive Directors do not take part in any discussion regarding their own remuneration. Increases in Non-Executive Directors' remuneration are made after review of market and competitor packages.

Non-Executive Directors do not have service contracts. Letters of appointment have been signed by all Non-Executive Directors which specify three months written notice by either party except in the event of a change of control of the business when six months notice will apply.

Aggregate Directors' Remuneration

2009
£000		 2008
£000

Directors’ Detailed Emoluments
Aggregate emoluments 1,205 1,448

Highest Paid Director
Aggregate emoluments 483 595

Directors' Emoluments

Basic Salary
£000		 Payment
in lieu of
pension
£000		 Fees
£000		 Benefits
£000		 Bonus
£000		 2009
Aggregate
emoluments
£000		 2008
Aggregate
emoluments
£000

Executive Directors
G Slark* 380 40 – 29 34 483 595
J R Murray 255 – – 11 23 289 399
A Ball 200 – – 11 18 229 281

Non–Executive Directors
P T Warry – – 120 – – 120 103
T Osbaldiston – – 42 – – 42 35
R J Harrison, OBE – – 42 – – 42 35
Total 2009 835 40 204 51 75 1,205
Total 2008 725 32 173 47 471 1,448

*Highest paid Director



Mr G Slark is a member of The BSS Group plc Pension and Life Assurance Scheme (defined benefit scheme). Mr J R Murray and Mr A Ball are both members of The BSS Group plc Group Stakeholder Pension Plan (defined contribution scheme). The pension benefits of Mr G Slark, through membership of The BSS Group plc Pension and Life Assurance Scheme, are restricted by the Inland Revenue's Pensionable Earnings Cap. To fund his pension arrangements above this limit he received payment of £39,800, which is included in the emoluments in the table above.

The employer contributions paid directly into the respective schemes for each Director in the period were:

Mr G Slark £16,625
Mr J R Murray £53,521
Mr A Ball £21,917

All of the Group's pension schemes were converted to salary sacrifice schemes during the year. The BSS Group plc Pension and Life Assurance Scheme was converted on 1 April 2008 and The BSS Group plc Stakeholder Plan was converted on 1 January 2009. The employer contributions above reflect the increases in contributions post the salary sacrifice conversion.

Benefits incorporate all assessable benefits arising from employment by the Group, which relate in the main to the provision of a company car.

Share schemes

Interests in Share Options


Details of outstanding share options at 31 March 2009:

Name of Director Scheme Date of
grant		 Exercise
price
(pence)		 Exercise
Period		 Number of
options at
31 March 2009		 Options
exercised
in period		 Options
lapsed
in period
A Ball 2006 S 28.6.06 289.13 01.9.09 – 28.2.10 3,233 Nil Nil
2005 P 19.8.05 n/a 31.3.08 Nil 22,159 Nil
2006 P 21.6.06 n/a 31.3.09 20,000 Nil Nil
2007 P 21.6.07 n/a 31.3.10 21,967 Nil Nil
2008 P 20.6.08 n/a 31.3.11 59,172 Nil Nil
J R Murray 2006 P 21.6.06 n/a 31.3.09 44,125 Nil Nil
2007 P 21.6.07 n/a 31.3.10 31,286 Nil Nil
2008 P 20.6.08 n/a 31.3.11 75,444 Nil Nil
G Slark 2005 P 19.8.05 n/a 31.3.08 Nil 45,478 Nil
2006 P 21.6.06 n/a 31.3.09 56,438 Nil Nil
2007 P 21.6.07 n/a 31.3.10 64,870 Nil Nil
2008 P 20.6.08 n/a 31.3.11 112,426 Nil Nil
Total 488,961 67,637 Nil

Notes

(i) Type S is a SAYE scheme and Type P is the Performance Share Plan.

(ii) The market price of shares at 31 March 2009 was 288.0p and the range during the year was 185.5p to 402.25p per share.

(iii) The Group uses the Black-Scholes valuation model to determine fair value for the options granted to both Directors and employees. Extracts of the assumptions used in the model can be found in note 19.

(iv) The Performance Share Plan only vests after approval by the Remuneration Committee, whose meeting is scheduled towards the end of May.

Directors' Interests

The Directors have notified the Group of the interests of themselves and their families in the ordinary share capital of the Group (expressed in number of shares of 5 pence each) as shown below:

Name of Director Shares held
31 March 2009		 Share options
outstanding
31 March 2009		 Shares held
31 March 2008		 Share options
outstanding
31 March 2008
A Ball 22,073 104,372 4,000 67,359
R J Harrison 4,000 Nil 4,000 Nil
J R Murray 50,000 150,855 50,000 75,411
T Osbaldiston Nil Nil Nil Nil
G Slark 113,332 233,734 86,500 166,786
P T Warry 52,936 Nil 52,936 Nil

The following tables detail the options exercised by Directors during the past two years:

2009
Name of Director		 Scheme Number of options Exercise price
(£)		 Market value at
exercise date
(£)		 Gains on exercise
2009
(£)
A Ball 2005 P 22,159 Nil 78,992 78,992
G Slark 2005 P 45,478 Nil 162,118 162,118
Total 67,637 241,110 241,110
2008
Name of Director		 Scheme Number of options Exercise price
(£)		 Market value at
exercise date
(£)		 Gains on exercise
2009
(£)
G Slark 2004 E* 88,152 1.7583 441,615 286,617

* Type E is an Approved and Unapproved Scheme option.



Directors’ Pensions

The increase in transfer values and accrued benefits for the Executive Director accruing retirement benefits under the Defined Benefit Pension Scheme, along with the accrued pension payable per annum at normal retirement age of 60, are shown below.

The accrued pension payable represents the entitlement payable annually on retirement in respect of service to the end of the year. The calculations exclude the effects of future inflation. The transfer value of the increase in accrued pensions in the year has been calculated in accordance with Actuarial Guidance Note GN11. The transfer values disclosed do not represent a sum paid or payable to the individual Director, instead they represent a potential liability of the Pension Scheme. Directors contribute 7% of pensionable salary to the Pension Scheme. The contributions have been excluded from the transfer values in the table below. The Director has the option to pay Additional Voluntary Contributions in respect of which neither the contribution nor the benefits are included in the table below.

Directors’ Remuneration Report Regulations 2002   Listing Rules
Pension
accumulated
2009
£000		 Increase in
pension
2009
£000		 Transfer
value
2009
£000		 Transfer
value
2008
£000		 Increase in
transfer value
2009
(excluding
member
contributions)
£000		   Pension
accumulated
2009
£000		 Increase in
pension 2009
(net of
revaluation)
£000		 Transfer
value of
the increase
2009
(excluding
member
contributions)
£000
G Slark 21 2 192 76 107   21 2 15

Annual General Meeting Approval

The shareholders will be invited to approve the Report of the Remuneration Committee at the 2009 Annual General Meeting.

Signature: R J Harrison, Chairman of the Remuneration Committee
R J Harrison, OBE
Chairman of the Remuneration Committee
27 May 2009

1 Information not subject to audit.