Variable pay short-term incentive
The variable pay for the Group consists of two elements, short-term incentives (STI) and long-term incentives (LTI). The two schemes are applied as follows:
Group STI plan
The short-term variable pay element of the pay mix is determined according to the Group
Short-Term Incentive Plan (STIP). The STI is designed to drive short-and long-term goals through short-term performance incentives and is designed in accordance with a hybrid approach, which combines a ‘bottom-up’ formulaic calculation with an incentive pool ‘cap’. The incentive pool is distributed based on Group, divisional and individual performance.
Before STI payments are considered, the Group must be deemed profitable, as determined by our profit/loss after tax.
The following outlines the application of the STI with reference to the principles that determine the incentive pool and how the pool is distributed to each participant.
The STI structure is aligned to the KPI framework weighted on our business (41%), our people and society (53%) and our environment (6%) as reflected below:
Our business (41%):
- An efficient, competitive and responsive economic infrastructure network
Our people and society (53%):
- Decent employment through inclusive economic growth
Our environment (6%):
- Protect and enhance our environmental assets and natural resources
The group modifier is based on the Group’s performance in line with the KPI framework, determined based on the group performance accumulative sliding scale.
Incentive pool determination
The bonus pool is based on 3% to 5% Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) (the Sharing Percentage) which is subsequently modified against the performance of the Group score card.
The following is applied when determining the threshold for FY2018/19 pool provision:
- The sharing percentage shall be reviewed by the Board on an annual basis.
- The group modifier shall contain key performance indicators (KPI) from the Shareholders’ Compact and shall be measured based on the following performance accumulative sliding scale of: - Threshold of 50%;
- Target of 100%;
- Stretch of 150%.
The calculation of the incentive pool is based on Board-approved percentage (between 3% - 5%) of EBITDA. The incentive pool is further dependent on the level of the KPI’s objectives met.
In determining the final Group performance score (i.e. the percentage of KPI objectives achieved), significance is placed on the weighting of the objectives.
This method therefore recognises a scale of achievement in which weighted scores for each of the KPIs are added to calculate the overall performance score of the business.
Board discretion in final payments
There is no automatic entitlement to an STI, payment of an incentive bonus is at the discretion of the Board and dependent on the annual financial results of the Group and/or any other factors as determined by the Group from time to time.
The incentive pool cap is determined as follows:
Actual EBITDA achievement of the financial year x (multiply by) by range between 3% - 5% (depending on company performance) x (multiply by) group modifier
|EBITDA||Sharing %||Group modifier||STI pool|
|Earnings before interest, taxation, depreciation and amortisation||A Board-approved sharing percentage ranging between 3% - 5%||A business modifier ranging from 33% – 150%||Total cap to fund the Group’s annual STI plan|
At the end of each financial year, the Board, through the Audit and Risk Committee, verifies actual performance against approved targets. STI payment consideration will be disqualified if the Group obtains a qualified audit opinion from the external auditors.
The incentive pool is distributed to individuals as follows:
|Total guaranteed pay / Basic salary and 13th cheque||STI eligibility on-target bonus percentage||Individual modifier||Incentive potential|
|Annual total guaranteed package received by an employee.||The STI on-target bonus percentage is determined by the employee’s Paterson grade level.||
||Potential incentive that an employee could receive.|
STI on-target bonus percentages are allocated to each grade level (according to the Paterson grades) and expressed as a percentage of the total guaranteed pay or annual basic salary plus 13th cheque. The on-target bonus percentages are as follows:
|Executives||Senior management||Middle management||Professionals||Skilled and general workers|
Airport General Managers: 45%
E1 - E3: 30%
|DL: 20%||CU: 15%||
A to B: 8.33%