The Ecsponent Group remuneration philosophy

In order to ensure the integrity and legitimacy of the remuneration system, the development and implementation of related policies, programmes, practices and decisions is directed by the main remuneration principles contained in the remuneration policy. The philosophy consists mainly of principles, values and points of departure relating to remuneration. The values guide the remuneration strategy and are more lasting in nature, while the objectives of the remuneration strategy will change as the Group’s business plan is amended. The aim of the remuneration philosophy is to:

  • communicate the remuneration commitments and expectations to the staff;
  • strengthen the organisational culture and underlying values of the Group;
  • guide and facilitate the remuneration implementation plan;
  • describe the manner in which the Group manages remuneration at the organisational level so that it is fair and consistent; and
  • serve as standard for the evaluation of the successful implementation of the remuneration policy and remuneration strategy.

The remuneration strategy is based on the following eight central principles:
1.1. Transparent communication
All information that is needed to take well-considered decisions regarding remuneration shall be communicated, while the confidentiality of personal remuneration information will be respected. This will improve the quality of decisions, promote openness and honesty and ensure that ownership and accountability are accepted.
1.2. Non-discriminatory practices
All remuneration policy directives and practices will be free of unfair distinction, since unfair discrimination based on race, gender, pregnancy, marital status, family responsibility, ethnic or social origin, sexual orientation, age, disability, religion, HIV status, conscience, convictions, political orientation, culture, language and birth is unacceptable.
Fair distinction, based on performance, scarcity factors and skills, will be applied.
1.3. Internal equity
The Group will remunerate staff fairly and consistently according to their role and individual value. The consistent application of the remuneration system throughout the Group is a priority.
1.4. External parity
Remuneration trends are taken into consideration so as to position the Group strategically to ensure competitive remuneration within the parameters of affordability, as far as is achievable and sustainable.
1.5. Performance-driven remuneration
The Group’s philosophy is to emphasise the link between remuneration and performance. In order to implement the philosophy an appropriate performance management systems will be developed and implemented to differentiate between excellent, average and below average performers. A major objective of the remuneration system is to reward overall contribution rather than status or position.
1.6. Affordability
The Group’s business plan and strategy, subject to budgetary constraints, determine the affordability limits with regard to remuneration and other human resource costs. The limits serve as a guide for what can be spent. The limits can be adjusted taking the following into consideration:

  • Necessity of competitive remuneration;
  • Available budget funds;
  • Inflation rate;
  • Desirability of performance bonuses; and
  • The need for structural adjustments with regard to the remuneration of individuals and occupation groups.

1.7. Continues learning
The Group encourages its employees to improve their skills and knowledge in arrears that contribute to the achievement of the Group’s strategy.
1.8. “Cost of Employment” package approach
The remuneration of individuals is based on the cost of employment. This approach offers certain flexible structuring choices to individuals, which is the fairest way of managing remuneration and costs within tax legislation.

Remuneration Policy

The Group underwrites a remuneration policy that:

  • aims to manage remuneration expenditure in an appropriate manner and offers the desired return in terms of the behaviour and performance of staff;
  • uses the value of the remuneration system as a central mechanism with which to achieve organisational objectives;
  • acknowledges the contribution of individual employees to the achievement of the Group’s objectives;
  • offers managers the necessary flexibility to manage remuneration effectively; and
  • positions the remuneration levels appropriately and sustainably in the labour market.

More specifically:

  • The remuneration system should offer managers a powerful mechanism with which to achieve operational and strategic objectives;
  • The remuneration system should enable the managers to differentiate the total remuneration according to individual performance. Good performers should be remunerated according to value, while excellent performers should be remunerated significantly better than underperformers;
  • The remuneration of excellent performance in a specific year should not influence remuneration in subsequent years. To this end the remuneration policy incorporates annual performance-linked bonus incentives that do not form a permanent component of the basic remuneration;
  • A major objective is to maintain the remuneration of average and excellent performers over time in real terms;
  • The Group aims to maintain a competitive remuneration position in the market;
  • A single basic level of remuneration per employment grade is not viable neither is excessive variations in basic remuneration levels per employment grade. As a result relatively narrow boundaries in terms of basic levels of remuneration will be implemented;
  • To guard against complacent and underperforming employees no minimum remuneration level per employee grade will be set; and
  • The slope of the remuneration curve, with the lowest and highest remuneration levels as its extreme anchors, is a function of the market as well as other economic, social, ethical and moral considerations.

Main drivers of the remuneration system

The main drivers of the remuneration system are as follows:

  • basic remuneration;
  • performance bonuses;
  • scarcity premiums; and
  • benefits.

1.9. Basic remuneration
Basic remuneration benchmarking: The group will continue to compare basic remuneration with the median in the market per employee grade.
Salary adjustments: Performance-driven salary adjustments are effected in January every year. Clear guidelines and support for this process will be given to the managers by the Human Resources Division before the start of the performance cycle.

1.10. Performance awards
There will be support for the development of a system of performance bonuses, subject to affordability, based on excellent, world-class performance. Performance awards are earned every year from scratch.

1.11. Scarcity premiums
The payment of scarcity premiums for certain skills will be considered. A scarcity premium will be linked to a post or incumbent when there is a demand for such a post or incumbent and there is limited availability of the necessary skills and competencies in the market.
The Group will pay a scarcity premium as an allowance to employees who fill these posts in order to attract and retain them. The payment of the premiums will be revised on an annual basis as a result of varying supply and demand factors in the market.

1.12. Benefits
Suitable communication programmes will be instituted to make staff aware of the employee benefits in order to create greater awareness of employment benefits so that the staff will view these as part of the total value proposition of employment within the group.

Implementation guidelines for the remuneration policy

1.13. Implementation

General adjustments:

  • Basic remuneration bands will be linked to different employment levels. These remuneration levels take factors such as market competitiveness and scarcity value into consideration;
  • The Group’s total remuneration curve will be reviewed at regular intervals to ensure that reasonable and sustainable variations are maintained between the remuneration levels of junior and senior employees;
  • Once a year general adjustments to the basic employee remuneration levels are planned subject to consideration of factors such as market competitiveness, market scarcity, CPI levels and affordability.
  • In light of the Group remuneration objective to ensure that the real remuneration of employees who perform average or better is at least maintained. It is therefore reasonable to accept that these employees will receive an adjustment at least equal to the general inflation rate;
  • Employees whose performance is below average or poor will receive adjustments that are lower than the inflation rate.

Financial acknowledgement of individual performance:

  • Annual performance bonuses for excellent performers are a variable form of remuneration, because the bonuses:
    • Have to be earned from scratch each year and thus have no carry through effect, and
    • Their quantity in any specific year is a direct function of the availability of funds.
  • At the end of each calendar year, the extent to which the respective businesses / operation have achieved their agreed objectives will be determined and these areas will share pro rate in the performance bonus.

Below-average performers:

  • Below-average performers will receive annual adjustments below the average or even no adjustments in cases of extremely poor performance;
  • Below-average performers will undergo a compulsory career management process;
  • If these staff members have not improved within the subsequent six months as agreed and there are insufficient reasons to condone the non-performance, these staff members will be dismissed.
  • If these under-achiever’s performance improves, confirmed through sustained improvement over a period of 24 months of directed career management, the remuneration level of the staff member concerned may be increased to the average ‘total cost of employment’ that applies to the particular post level at that stage.

Remuneration levels significantly higher than the remuneration level range

  • An employee’s remuneration can exceed the remuneration range due to market scarcity factors and the market value of specific individuals;
  • These employees could continue to be allocated levels of remuneration higher than the average total cost of employment subject continued excellent performance, as agreed in advance for each subsequent period of time.

Assurance of parity treatment at individual post levels:

When the remuneration levels of individual members of staff are analysed per post level, it is normal to expect that there will be cases where the remuneration levels of staff members are significantly lower than those of the new entrants to that post level. This phenomenon could arise from various factors, including the fact that new entrants negotiated better for their specific remuneration level in the post level concerned, or because the remuneration that the new entrant earned elsewhere at that stage was so high that the need to be competitive required that a higher remuneration level be offered. This is a normal phenomenon, which makes it necessary to analyse the situation regularly and, where justified, to institute individual corrections to the remuneration levels of those members of staff who constantly perform well but earn considerably less at the same level than new entrants. For this purpose, the normal implementation practice is:

  • To map the remuneration levels of all members of staff every year.
  • To identify anomalies such as those discussed above.
  • To verify the performance levels of the anomaly cases per post level over the preceding two years.
  • With regard to the anomaly cases in which the performance over the preceding two years should justify it, to move up the remuneration levels to be at least equal to the average total cost of employment (basic remuneration level) for the post level concerned, as long as there are budgeted funds for such structural adjustments.

1.14. Implementation – performance management

Context

The achievement of the Ecsponent Group’s vision is dependent primarily on the sustained performance of all the staff. It thus is the excellence, capacity building and role playing of each member of staff that should lead to the achievement of the vision.
Purposeful and equitable performance management of all staff is an essential enabler in the achievement of the vision. Through appropriate performance management the Group’s endeavours to empower all staff functionally, to such an extent that both the Group and every individual staff member will receive equitable benefit from this process. In this manner the Group ensures sufficient alignment between the manner in which its vision is being pursued and the equitable career development and remuneration expectations of each member of staff.

Basic points of departure

Performance management will be based on the following central points of departure:

  • Minimum norms that are used in a uniform manner as a base across the boundaries of all environments.
  • Performance management will be based on evaluation in terms of work objectives that were agreed upon in advance in an iterative and participatory manner between the supervisor and the staff member concerned.
  • Providing sufficient insight into the development needs of each member of staff.
  • Producing outputs of such a nature that the staff can be remunerated in a sustained manner in accordance with individual performance.
  • It should ensure the equitable treatment of all staff across all environments.
  • It should be embedded in the performance of individual environments, as agreed on from time to time in terms of the Group’s strategic direction.
  • It should offer a suitable mechanism for the Group’s management to take fair and well-considered decisions so as to offer performers aged 55 years and older the opportunity to continue with their service up to and including the age of 65, or up to and including an age limit between the ages of 60 and 65, determined to be to the benefit of the Group and to be affordable.

Desired outcomes

In relation to the staff, performance management offers the Group an opportunity to strive for both intermediate and final outcomes.
Intermediate outcomes focus particularly on the improvement of the work behaviour of staff and, in relation to this, the quantity of work that could be expected of an individual member of staff.
Final work agreements focus on the final outcome of work that is carried out by each member of staff on the basis of a prior agreed objectives / outcomes, for example the achievement of specific sales targets.

A uniform point of departure

To be able to ensure uniformity – particularly with regard to the same approach in divergent contexts, the following are required:

  • Full cognisance of the use of approved minimum norms for different levels; and
  • Full cognisance of the use of contextualised environment-specific objectives for the various strategic management indicators.

The system

Ecsponent management will evaluate various performance management systems and implement a uniform system throughout the group.

The annual performance cycle

The annual performance cycle will incorporate the following steps:

  • Minimum performance standards, per employment level, determined to serve as the central starting point for the Group for the following year.
  • Individual performance objectives are set with all individual staff members, taking the minimum performance standard into account, for the following performance period.
  • The performance of staff during the performance period will be managed by means of appropriate mechanisms, including regular performance reviews between the direct supervisor and the direct subordinate on the performance of the staff member.
  • At the end of the performance period the immediate supervisor undertakes a final evaluation of each staff member’s performance for the period by means of a participatory process with the staff member concerned.
  • The outcomes of this annual evaluation will include the following:
    • The career planning that is envisaged for the coming year;
    • The training and development opportunities that are planned for the coming year; and
    • A performance rating in line with the performance management process to be implemented.
  • Each individual staff member will indicate formally that they have taken note of the outcomes of the formal annual performance evaluation and that the evaluation had been discussed with them.
  • The supervisors’ annual evaluation of their subordinates will be checked by the head of department / HR director concerned to ensure parity between all staff in the particular area.
  • The outcomes of the annual performance evaluation will be forwarded to the Human Resources Division.
  • The Human Resources Division will undertake an analysis of the performance evaluations and will compile a report for discussion including:
    • Training and development needs and proposals for how these can be provided during the following year; and
    • Evaluations of the results of the performance rating process per Group entity and across entities with the Group and proposals to ensure the equitable treatment of all staff.
  • Once the percentage by which the remuneration account could grow in the next year, individual remuneration adjustments will be determined by using the overall performance mark of each member of staff.
  • Annual performance bonuses: Over and above the abovementioned performance-based adjustments in the basic remuneration levels of individuals, funds will be allocated each year on the basis of affordability for the payment of once-off performance bonuses.

Directors’ remuneration

Executive directors’ performance will be subject to the Group remuneration policy, with the performance management process being applied to quantify directors’ performance.
The performance evaluation of the Group’s executive directors will be performed by the Group’s remuneration committee.

Approval of the Group remuneration policy

The Group remuneration policy was approved by the Chairman of the board and the Chairman of the Remuneration Committee on 19 August 2016 and will be due for review in August 2017.