Key management personnel compensation

Key management personnel are the people with authority and responsibility for planning, directing and controlling the company’s activities, and they always include every director. FRS 102 paragraph 33.7 requires their total compensation to be disclosed as a single figure, unless the key management are exactly the directors and directors’ pay is already disclosed under company law, the company is a qualifying subsidiary, or it is a small entity applying Section 1A.

Who counts as key management personnel?

Paragraph 33.6 defines key management personnel as those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Two consequences follow.

• Every director is included, including non executive directors who attend a few board meetings a year.
• The group can be wider than the board. ICAEW’s related party helpsheet stresses that the definition is wider than directors and that senior managers with decision making power should be considered. A finance director who is not on the statutory register, or an operations director in title only, may still be key management if they genuinely direct the business.

In a group, ICAEW notes that the directors of a main operating subsidiary may be key management of the group as a whole, particularly where the parent is a largely inactive holding company. Titles are not decisive; the test is who actually plans, directs and controls. A practical starting point is the organisation chart and the minutes of whoever makes the strategic decisions.

What goes into total compensation?

Paragraph 33.6 says compensation includes all employee benefits as defined in Section 28, including share based payments under Section 26. Section 28 covers short term benefits, post employment benefits, other long term benefits and termination benefits. ICAEW lists what should be included:

• wages, salaries and employer social security contributions such as employer’s National Insurance, including paid sick and holiday leave;
• profit sharing and bonuses;
• non monetary benefits such as medical cover, housing, cars and free or subsidised goods or services;
• pension contributions;
• any amount recognised in profit or loss for share based payments; and
• any other employee benefits provided in the period.

The figure should generally match what is charged to profit or loss. For non monetary benefits there is a choice of measure (cost to the employer, value to the employee or benefit in kind value), and ICAEW says a policy should be chosen and applied consistently, noting most entities use cost to the employer.

Paragraph 33.6 also covers consideration paid on behalf of the entity, for example by its parent or by a shareholder, in exchange for services to the entity. If a director is paid entirely by the parent, the subsidiary’s key management compensation should still reflect the services that director provides to it. Where key management services are bought from another entity under a management agreement, paragraph 33.10(d) requires transactions with that entity to be disclosed as a separate category under paragraph 33.9.

When can the disclosure be left out?

Situation	Effect	Reference
Company is legally required to disclose directors’ remuneration and the key management personnel are exactly the directors	Exempt from 33.7	Paragraph 33.7A
Qualifying entity (a subsidiary included in publicly available consolidated accounts) using the reduced disclosure framework	Exempt from 33.7	Paragraph 1.12(e)
Small entity applying Section 1A	33.7 not in the minimum list	Paragraph 1AC.35 refers only to 33.9 and 33.14

The 33.7A exemption is narrower than it looks. The FRC’s basis for conclusions (paragraph B33.4) says an entity that is not exempt must disclose total key management personnel compensation including the amount relating to directors, so adding one senior manager to the key management group means a single total covering everyone, not just that manager’s pay. Medium sized and large companies are required by Schedule 5 to SI 2008/410 to disclose directors’ remuneration, so they can use 33.7A if the people are the same. A small company has no legal requirement to disclose directors’ pay, which is one reason it falls back on the Section 1A position instead.

A footnote to paragraph 33.9 adds that where 33.7A applies, the entity need not give extra disclosure about directors’ share based payment arrangements under that paragraph.

How does this differ from directors’ remuneration under company law?

The company law disclosure and the FRS 102 figure measure different things. Schedule 5 paragraph 9 to SI 2008/410 defines a director’s remuneration to include salary, fees, bonuses, taxable expense allowances and the estimated money value of non cash benefits, but to exclude share options, company pension contributions and amounts under long term incentive schemes, which are disclosed separately or not at all. Key management compensation under Section 28 is a single all inclusive total that also brings in employer social security costs and share based payment charges.

The FRC’s basis for conclusions (B33.3) explains why both are kept: the two can differ significantly, for example when the directors and key management are different people, and not all entities using FRS 102 are subject to company law. See directors’ remuneration disclosures for the Schedule 5 requirements.

What about other transactions with key managers?

Compensation is only part of the picture. The FRC notes in B33.5 that transactions with directors that are not directors’ remuneration may still need disclosure under paragraph 33.9. Loans, purchases of company assets, rent paid to a director for premises and guarantees are related party transactions, disclosed for key management in aggregate under paragraph 33.10(c). See related party disclosures and directors’ loans under FRS 102.

What does the disclosure look like?

Illustration only. A medium sized company has two directors and a non board sales director who runs the business day to day and is treated as key management. In the year the directors cost £180,000 in salary, £22,000 in employer’s National Insurance and £20,000 in pension contributions. The sales director cost £90,000 in salary, £11,000 in employer’s National Insurance, £6,000 in pension contributions and £4,000 for a company car at cost.

Key management personnel compensation	2026
Total compensation	£333,000

Because the sales director is key management but not a director, 33.7A cannot apply and the total must include the directors as well. The separate directors’ remuneration note under Schedule 5 would show the directors’ remuneration of £180,000 and pension contributions of £20,000, without the employer’s National Insurance. A short sentence explaining who is included helps a reader reconcile the two notes.

What mistakes come up?

• Claiming 33.7A when a non director is key management. The exemption needs the two groups to be identical.
• Leaving out employer’s National Insurance or share based payment charges. The definition follows Section 28 and Section 26, not the Schedule 5 definition of remuneration.
• Ignoring pay borne by a parent or shareholder. Paragraph 33.6 includes consideration paid on the entity’s behalf.
• Thinking small companies must give it. They need not under Section 1A, though they may choose to if it helps give a true and fair view.
• Treating the total as covering everything. Loans, guarantees and other dealings with key managers still need the paragraph 33.9 disclosures.

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Related Accountapedia entries

• Staff numbers and staff costs disclosures
• Reduced disclosures for qualifying entities
• Naming the ultimate controlling party
• Close family members as related parties
• Disclosing trustee payments and expenses
• Accounting for key person insurance

Sources

• Financial Reporting Council: FRS 102 September 2024 tmKYWO6
• ICAEW: Related party disclosures under frs 102
• legislation.gov.uk: SI 2008/410, schedule 5
• legislation.gov.uk: SI 2008/409, schedule 3
• legislation.gov.uk: SI 2008/410, regulation 8

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.