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  2. 2. Remuneration 2 ACKNOWLEDGEMENT I take this opportunity to thank my Project Guide Prof. Budhkar whose continuous guidance and encouragement made possible to complete this project during the course of study. I wish to thank all HR Executives and Managers at ____________ who made me available the valuable information, tools and suggestions. I also owe my special thanks to Prof. Vijay Page-Director General [METIM], Prof. Sandeep Chopde [Part Time Course Coordinator-METIM], faculty, staff and Library staff members of METIM who have helped and guided me throughout the tenure of my project. This project would not have seen the light of the day without their help and guidance. Last but not the least, thanks are also due to all my family members, friends and well wishers whose continuous encouragement has led to the completion of this project.
  3. 3. Remuneration 3 TABLE OF CONTENT Sr. No. Index Page No. 1. What it? 04 - 08 2. Introduction 09 3. Remuneration policy 10 - 11 4. Staff remuneration 12 - 14 5. Commitment 15 6. Executive remuneration 16 - 19 7. terms and conditions 20 8. Performance graph 21 9. Reference 22 10. Thank you 23
  4. 4. Remuneration 4 Remuneration Remuneration is pay or salary, typically monetary payment for services rendered, as in an employment. Usage is considered formal. The basis for calculating Workers' Compensation premium. Remuneration is primarily payroll, but may also include other forms of employee compensation. Workers' Compensation premium is computed by applying varying rates. Commonly called payroll. Includes wages, commissions, bonuses, overtime pay, pay for holidays, vacations and sickness, payment for piece work, value of meals and lodging and other substitutes for money. Payroll : Commonly called remuneration. Includes wages, commissions, bonuses, overtime pay, pay for holidays, vacations and sickness, payment for piece work, value of meals and lodging and other substitutes for money. (State exceptions may apply) Payroll Audit : An examination and verification of a policyholder's records of employees entitled to compensation, and the amounts expended therefore, which is used in determining the premium for certain lines of insurance such as workers compensation. Premium auditors may contact you to determine the accuracy of the payroll figures. Certain policies written on a reporting or adjustable form give the insurer the privilege of auditing the policyholder's records to verify the accuracy of the premiums paid. Payroll Division : A single employee's payroll can be divided when the employee works in construction, erection, or in trucking operations that are conducted as a separate enterprise. Proper
  5. 5. Remuneration 5 records must be kept in dollar amounts that reflect work actually spent in the above mentioned classes before a breakdown can be applied. Without adequate records, the entire payroll for the employee must be placed in the highest rated classification. An estimated or percentage allocation of payroll is not allowed. Payroll Figures : The insured or accountant provided business payroll documents for each employee and subcontractor to confirm actual payroll pay out during the policy term. Remuneration can include: Commission Compensation methods (in online advertising and internet marketing) Compensation o Executive compensation o Deferred compensation Employee stock option Fringe benefit Salary Wage
  6. 6. Remuneration 6 1) Commission : The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold. Commission rates are generally based upon the achievement of specific targets which have been agreed between management and the salesperson in question. Offering monetary compensation in the form of commission alone, or commission in addition to salary rather than simply a fixed salary, is intended to create a strong incentive for employees to invest maximum effort into their work. Common industries where commission is used include car sales, property sales, insurance broking and many other sales jobs. 2) Compensation : Executive compensation : Executive compensation (also, director remuneration) is how top executives of business corporations are paid. This includes a basic salary, bonuses, shares, options and other company benefits for work on the board of directors. Over the past three decades, director remuneration has risen dramatically beyond the rising levels of an average worker's wage. Deferred compensation : Deferred compensation is an arrangement in which a portion of an employee's income is paid out at a date after which that income is actually earned. Examples of deferred compensation include pensions, retirement plans, and stock options. The primary benefit of most deferred compensation is the deferral of tax to the date(s) at which the employee actually receives the income. 3)Employee stock option : Employee stock options (ESOs) are non-standardized, over-the-counter options that are issued as a private contract between the employer and employee. Over the course of employment, a company issues vested or non-vested ESOs to an employee which are struck at a particular price, often the company's current stock price. Depending on the vesting schedule and the maturity of the options, the employee may elect to exercise the options at some point, obligating the company to sell the employee its stock at whatever stock price was used as the strike price. At that point, the employee may either sell the stock, or hold on to it in the hope of further price appreciation.
  7. 7. Remuneration 7 Employee stock options have the following differences from standardized, exchange- traded options: • Strike: • Quantity: • Vesting: • Duration: • Non-transferable: • Over the counter: • Tax issues: 4) Fringe benefit : Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Where an employee exchanges (cash) wages for some other form of benefit, this is generally referred to as a 'salary sacrifice' arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree. Fringe benefits can include, but are not limited to: (employer-provided or employer- paid) housing, group insurance (health, dental, life etc.), disability income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non- paid), social security, profit sharing, funding of education, and other specialized benefits. Advantages of employee benefits : There are a number of advantages to employee benefits for both employer and employee. Employer advantages :  Helps attracts and retain better qualified employees.  Provides high risk coverage at low costs easing the company's financial burden.
  8. 8. Remuneration 8  Improves efficiency and productivity as employees are assured of security for themselves and their families.  Premiums are tax deductible as corporation expense, which means savings with quality coverage. Employee advantages :  Peace of mind leading to better productivity as employees are assured of provision for themselves and families in any mishap.  Employees with personal life insurance enjoy additional protection  Confidence in company's EB schemes boost staff morale and pride in company. 5) Salary : A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. From the point of a view of running a business, salary can also be viewed as the cost of acquiring human resources for running operations, and is then termed personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts. 6) Wage : A wage is a compensation, usually financial, received by a worker in exchange for their labor. Depending on the structure and traditions of different economies around the world, wage rates are either the product of market forces (Supply and Demand), as is common in the United States, or wage rates may be influenced by other factors such as tradition, social structure and seniority, as in Japan.[citation needed] Several countries have enacted a statutory minimum wage rate that fixes the price of certain kinds of labor.
  9. 9. Remuneration 9 Introduction Remuneration sets out the annual remuneration of the Board earned, together with any gains under long-term incentive arrangements. It also describes the background and outlines the Group's remuneration policy, together with the performance graph required by the Directors' Remuneration Report Regulations 2002 (the Regulations). The Remuneration Committee is responsible for making recommendations to the Board on the Company's remuneration policy and, within the terms of the agreed policy, determining the total individual remuneration packages of the Executive Directors and members of the CET (Executives). The Committee has developed the remuneration policy to align executive remuneration with the interests of shareholders whilst meeting the imperative of recruiting and retaining the executive talent essential to the leadership of the Company. The remuneration policy was finalised after undertaking an extensive consultation process with shareholders and institutional bodies. The remuneration policy is designed to establish a framework for remuneration which is consistent with the Company's scale and scope of operations, meets the recruitment needs of the business and is closely aligned with shareholder guidelines.
  10. 10. Remuneration 10 Remuneration policy PRINCIPLES The Committee has established four core principles which underpin the new remuneration policy for GSK. These are: securing outstanding executive talent; pay for performance and only for performance; robust and transparent governance structures; and a commitment to be a leader of good remuneration practice in the pharmaceutical industry. In formulating the policy, the Committee decided that: the remuneration structure must support the business in a very competitive market place; Shareholder guidelines will be followed to the maximum extent consistent with the needs of the business and the Company would maintain a regular dialogue with shareholders; global pharmaceutical companies are the primary pay comparator group; performance conditions would be based on the measurable delivery of strong financial performance and the delivery of superior returns to shareholders as compared with other pharmaceutical companies; a high proportion of the total remuneration opportunity will be based on performance-related remuneration, which will be delivered over the medium- term to long-term; and no ex-gratia payments will be made.
  11. 11. Remuneration 11 Overall, the policy is intended to provide median total remuneration for median performance. Poor performance will result in total remuneration significantly below the pay comparator group median, with the opportunity to earn upper quartile total remuneration for exceptional performance. This strong alignment with performance is demonstrably in the interests of shareholders and provides the Executives with unambiguous signals about the importance of delivering success to the Company's shareholders.
  12. 12. Remuneration 12 Staff remuneration structure Base Salary : Annual salary as defined in the relevant industrial instrument excluding any allowances or additional payments. Total Remuneration : Base salary plus: regular allowances (paid in accordance with relevant industrial instruments) annual leave loading
  13. 13. Remuneration 13 Total Employment Package/Cost : Total employment cost is a term used to describe the sum of all cash and non-cash benefits employees receive:  annual taxable salary  flexible benefits (eg salary sacrifice, car, leave loading)  non-flexible benefits (eg employer superannuation)  fringe benefits tax (where applicable)  cost of fringe benefits and non fringe benefits  cost of fringe benefits tax
  14. 14. Remuneration 14 For example: Base salary $60,000 Employer superannuation contributions of 17% $10,200 Annual leave loading $ 695 Market allowance $ 5,000 Total employment package $75,895 For further information or assistance please contact the Remuneration and Workforce Strategy team in the HR Unit.
  15. 15. Remuneration 15 COMMITMENT The Committee will apply this policy on a consistent and transparent basis. Any significant change will be discussed with shareholders in advance of implementation. PAY AND PERFORMANCE COMPARATORS The following table sets out the companies used for pay and performance comparison: Company Country Market Capitalisation Abbott Laboratories US 37,840 AstraZeneca UK 31,075 Bristol-Myers Squibb US 25,962 Eli Lilly US 33,448 GlaxoSmithKline UK 71,704 Johnson & Johnson US 98,028 Merck US 37,123 Novartis Switzerland 70,077 Pfizer US 105,473 Roche Holdings Switzerland 42,122 Sanofi-Aventis France 57,954 Schering-Plough US 16,016 Takeda Pharmaceutical Company Japan 23,323 Wyeth US 29,596 During 2004 reduced the size of the comparator group to 13 companies and GSK. The Committee subsequently determined that for a number of reasons, including focus of operation and market capitalisation, there was no other suitable company to add to the group.
  16. 16. Remuneration 16 EXECUTIVE REMUNERATION CONSISTS OF THE FOLLOWING COMPONENTS: BASE SALARY : Base salaries will be set by reference to the median for the relevant market. For Executives this is the pharmaceutical pay comparator group. Base salary is the only element of remuneration that is fixed. ANNUAL BONUS : All bonuses are determined on the basis of a formal review of annual performance against stretching financial targets based on profit before interest and tax and are subject to detailed assessment of individual, business unit and group achievements against objectives. In setting the bonus awards for 2004, the Committee took into account the achievement of management in maintaining growth on a CER basis, whilst absorbing £1.5 billion of lost sales to generics. LONG-TERM INCENTIVES : The remuneration policy provides that annual long-term incentive awards will normally be made up of a performance share award and a share option award. The remuneration
  17. 17. Remuneration 17 policy places greater emphasis on the use of performance shares rather than share options. The Committee has considered which performance conditions should be applied to the long-term incentives. The Committee concluded that it was appropriate to measure performance using a combination of absolute financial results (based on earnings per share - EPS) and the delivery of superior value to shareholders (based on Total Shareholder Return - TSR). For the Executives, the level of performance shares vesting is based on the Company's TSR relative to the performance comparator group over a three-year measurement period. In respect of the awards granted in 2004, if GSK is ranked at position 7 (the mid-point) of the performance comparator group, 35% of the shares will vest and if it is below that position then none of the shares will vest. Only if GSK is one of the top two companies will all of the shares vest. When determining vesting levels, the Committee will have regard for the Company's underlying financial performance. The share options granted in 2004 to the Executives are linked to the achievement of compound annual EPS growth in excess of the Retail Prices Index (RPI) over the performance period, which is the three years following the grant of an option. When setting EPS targets, the Committee considers the Company's internal projections and analysts' forecasts for GSK's EPS performance, as well as analysts' forecasts for the pharmaceutical industry. For the 2004 grant, vesting increases on a straight-line basis for EPS performance between the hurdles set out in the table below. Annualised growth in EPS Percentage of award vesting RPI + 5% 100% RPI + 4% 75% RPI + 3% 50% RPI + 3% 0% This performance condition is substantially consistent with UK shareholder guidelines and expectations and is demanding when compared with those operated by other global pharmaceutical companies. This is consistent with the policy of providing pay for performance and only for performance. Performance is measured over the three financial years following the grant of an option. The Committee has decided for the 2004 grant that there will be no performance
  18. 18. Remuneration 18 retesting, so if the performance condition is not met after the three-year period, the option will lapse. The performance criteria relating to performance shares and share options awarded and granted prior to 2004 are given in the Annual Report 2004. PENSIONS : The Executives participate in GSK senior executive pension plans. The pension arrangements are structured in accordance with the plans operated for Executives in the country in which the Executives are likely to retire. Benefits are normally payable at age 60, although it has been agreed that Dr Yamada will retire at age 62. Overview : The table below shows the direct remuneration of the Board of Management for 2007. As a result of him stepping down from the Board of Management on 30 August 2007, the table reflects the remuneration of 8 months for Christian Raskin. Please note that Sandy Lyons was employed by Draka for the whole year 2007 but that the table only reflects the remuneration for Sandy Lyons over the period 1 September 2007 until 31 December 2007 (reflecting his 2007 tenure as member of the Board of Management of the Company). 2007 Direct Remuneration Board of Management Amounts Base salary Short term incentive Long term incentive Pension Allowances* Total Sandy Lyons 167,100 167,100 - 143,311 70,385 524,129 Ingolf Schulz 538,051 428,000 326,906 320,233 50,575 1,663,765 Frank Dorjee 425,000 340,000 298,283 235,090 - 1,298,373 Christian Raskin 263,333 158,000 14,554 100,262 30,819 566,968 * ‘Allowances’ primarily reflect the gross compensation for housing costs, education and daycare.
  19. 19. Remuneration 19 The long term incentive reflects the fair value of shares, (conditionally) granted to the members of the Board of Management. The actual grant of shares depends on the Company’s future performance in relation to the peer group.
  20. 20. Remuneration 20 Executive Director terms and conditions The policy regarding the Executive Directors' contracts was the subject of extensive review and change during 2003. This resulted in a new framework for contracts for Executive Directors appointed in the future. Dr Garnier, Mr Coombe and Dr Yamada agreed to changes in their contractual terms without compensation to bring their contractual terms broadly in line with the new contractual framework, including the reduction of contractual notice period from 24 to 12 calendar months. However, to honour certain aspects of their 'old' contractual terms, there are a number of individual features which will be retained. In the event of early termination by the Company, Dr Garnier and Dr Yamada would receive a cash sum equivalent to the total of their annual salary, on target bonus and pension contributions for the 12 months notice period. Mr Coombe will retire from the company on 31 March 2005.
  21. 21. Remuneration 21 PERFORMANCE GRAPH The graph below sets out the performance of the Company relative to the FTSE 100 index of which the Company is a constituent and, for information, to the median of the performance comparator group since the merger on 27 December 2000. The graph has been prepared in accordance with the Regulations and is not an indication of the likely vesting of awards granted under any of the Company's incentive plans.
  22. 22. Remuneration 22 REFERENCE Websites :
  23. 23. Remuneration 23 …..THANK YOU…..