| 2005 | 2004 | ||
| Staff costs (including directors) | £m | £m | |
|---|---|---|---|
| Wages and salaries | 23.0 | 23.0 | |
| Social security costs | 3.2 | 2.4 | |
| Pension costs | 3.7 | 2.9 | |
| Equity-settled share-based payments | – Incentive schemes (RSP, SIP, LTIP, RAA, CISP) | 8.4 | 7.0 |
| – Sharesave schemes (SAYE) | 0.1 | 0.1 | |
| 38.4 | 35.4 |
The average number of employees of the Group during the year was 715 (2004: 713) of which some 540 (2004: 546) were employed directly at the Group’s properties and their costs recharged to tenants.
The Group’s equity-settled share-based payments comprise the Restricted Share Plan (RSP), the Long Term Incentive Plan (LTIP), the Share Incentive Plan (SIP), various Sharesave Plans and two recruitment schemes relating to the new Chief Executive, the Recruitment Award Agreement (RAA) and the Co-Investment Share Plan (CISP).
The RSP was used for the last time in June 2003. The Company expenses an estimate of how many shares are likely to vest based on the market price at the date of grant, taking account of expected performance against the net asset value per share growth target and the three year service period. Under the SIP the Company gives eligible employees free shares of up to £3,000 a year. They can also purchase partnership shares for up to £1,500 a year that are matched 2 for 1 by the Company. The free and matching shares are purchased at fair value in the market and expensed at time of allocation.
At the 2003 AGM the shareholders approved the LTIP whereby the Company may award employees a combination of performance shares and options. Both components have the same performance targets based on net asset value per share growth and a three year service period. Performance shares are valued at the market value at the date of the award. The options are valued using a Black-Scholes model adjusted for dividends according to the table below:
| Long-Term Incentive Plan: 2004 awards | 28 May | 29 November |
|---|---|---|
| Share price at grant date | 663p | 796p |
| Exercise price | 663p | 796p |
| Option life in years (maximum 10) | 7 | 5 |
| Risk free rate | 5.10% | 4.50% |
| Expected volatility | 30% | 30% |
| Expected dividend yield | 3.00% | 2.00% |
| Value per option | 194p | 223p |
For both LTIP components the Company estimates the number of shares or options likely to vest and expenses that value over the relevant period. Volatility has been estimated by taking the historical volatility in the Company’s share price over a four year period and adjusting where there are known factors that may affect future volatility. Vesting estimates take account of the Company’s high staff retention rate.
Under the Sharesave Plans eligible employees can save up to £250 a month over a three or five year period and use the savings to exercise an option granted at the outset at a 20% discount to the then prevailing share price. The fair value of the various options is expensed over the service period, based on a Black-Scholes model, assuming, for the grants during the current year, a risk-free rate of 4.50%, expected volatility of 30% and an expected dividend yield of 2.00%. The values per option for these schemes range from 259 pence to 294 pence. There are no performance measures. An estimated 5% of the three year options and 7% of the five year options are assumed to lapse as employees leave the Company prior to the minimum service period.
Awards under the RAA and CISP are valued at the fair value of the shares at the date of grant and expensed over one year for the RAA, three years for the CISP.