UC RUSAL Sustainability report 2015


Incentive System

Incentive System

UC RUSAL provides its employees with stable and competitive wages and offers a comprehensive social benefits packageThe amount of remuneration payable to an employee depends on certain factors such as the employee’s qualifications and productivity, on the difficulty of the work to be performed and the tasks to be tackled, and the employee’s performanceThe Company has a staff assessment system implemented through the electronic staff assessment system. About 18% ofemployees are reviewed annuallyG4-LA11

An employee’s wages consist of a fixed component and a variable component. Wages are indexed taking into account growth in the consumer price index and the conditions of the local labor market (see the table below). In 2015, the project-related bonus payment systems underwent certain improvements. The Company carried out an indexation of wages and a number of elements of the social programme in accordance with the requirements of the Industry Tariff Agreement and the provisions of collective bargaining agreements.

The minimum wage of the lowest category employees at enterprises of the Company on a full time basis is greater than the minimum wage in their respective regions. In 2015 the average monthly wage for all enterprises of the Company was USD 925.

Wage composition

Fixed component

Variable component

· Salary/tariff rate

· Statutory additional payments, surcharges and compensation, including for work in districts of the Far North and equivalent localities, for work in harmful and/or hazardous working conditions, and for work underground, etc.

· Annual premium according to the year’s results

· Monthly bonus for achieving production targets and complying with labour discipline, occupational health and safety requirements,

· Bonus payments from the enterprise development fund (EDF) are paid for achieving the overall annual key performance target of the enterprise and the Company

· Project bonuses for participating in implementing UC RUSAL Production System projects

· Kaizen[40] bonuses

· Bonuses from the fund of the managing director of the enterprise, payable for current service and achievements

Company wage costs and bonus payments to employees, USD million

2013

2014

2015

1,105

957

686,3

The reduction in labor costs and bonus payments is as a result of the closing of anumber of inefficient enterprises and production facilitiesand a resultantreduction in staff numbers, as well as the reduction of Russian ruble against US dollar.

Share option programs

UC RUSAL operates two share incentive programmes for the employees of the Company. In 2015 the Company continued both programs:

- The Production System Incentive Program (PSIP);

- The Long-Term Incentive Program (LTIP).

The Production System Incentive Programme (PSIP). Shares awarded under the PSIP programme are transferred to an employee annually for three years. 2,055,740 shares were transferred to PSIP programme participants in 2015. Directors of the Company and related persons have no right to participate in this programme. New shares in the Company were not issued for the programme. The maximum number of shares in the PSIP does not exceed 0.05% of the total number of issued shares as at the date of their award.

The Long-Term Incentive Programme (LTIP). Within the frameworks of this programme members of the Board of Director select, at their discretion, employees to participate in the LTIP from a list of eligible participants. The awarded shares are then transferred to a selected employee for a period of five years in parts equal to 20% of the LTIP award each year.

From the shares conditionally awarded under the Bonus Payment Programme for 2010, the fifth tranche allocated in November 2015, totaled 1,338,734 shares. For the year ending 31 December 2015, Elian Employee Benefit Trustee Limited, being the trust manager of the Rewards Trust to employees of UC RUSAL and the LTIP programme, acquired in total 698,297 shares of nominal value USD 0.01 each. The acquired shares are equal to approximately 0.005% of the issued share capital of the Company as of 31 December 2015 and the last date of modification.

Corporate award system

Division heads use different types of non-financial rewards for encouraging employeesand workforcesincluding:

· Commendations and letters of thanks to the best employees;

· Pennants to employees or workforces;

· Thanks from an enterprise head to an employee or workforce for attaining the best indicators in implementing the production system or cost-cutting, etc.;

· Letter of thanks from an enterprise head to a family for an employee’s achieving success in production, occupational health and safety, or environmental protection;

· A badge on overalls for an employee’s achieving success in occupational health and safety or environmental protection, or to the winners and prize winners in the Improvement of the Year competition.