YOUR GUIDE TO THE FORTESCUE STAFF INCENTIVE PLAN (SIP)

Transcription

1 YOUR GUIDE TO THE FORTESCUE STAFF INCENTIVE PLAN (SIP) Financial year July 2012 to 30 June 2013

2 Contents 1. Intention Summary detail Incentive objectives and weightings Remuneration and nomination committee discretion Participation in the SIP Exclusions Conditions of payment Changes during the financial year Category objectives Setting objectives Authorisation of payments Payment of incentive Tax Summary How will my payment be calculated? 09 02

3 1. Intention The intention of the Staff Incentive Plan (SIP) is to focus people on what is most important for Fortescue to achieve in the particular financial year. Our objectives come from the annual Business Planning and Budgeting process and are established in line with one of our values: Set stretch targets then achieve them. If we achieve our objectives, the SIP provides a potentially generous payment over and above market competitive salaries. It is a key part of our attraction and retention strategy and applies only to permanent Fortescue employees. This document provides a summary of the SIP for the 2013 Financial Year (1 July 2012 to 30 June 2013). If you are unsure of any aspect of the SIP or require further information, please ask your Supervisor, Manager or HR representative. 2. Summary detail The SIP operates at the discretion of the Board of Fortescue. It is not a guaranteed part of employment conditions. The total incentive is calculated as a percentage of the Total Fixed Remuneration (TFR). This includes employee s Total Cash salary plus employer superannuation contributions plus any Non Cash Salary benefit. For site based employees, TFR includes the site based allowances such as continuous shift allowance, site allowance, rail allowance etc. It does not include Pilbara residential allowances such as the Pilbara Residential Travel Allowance or Power Allowance. Every employee in the SIP has a Participating Percentage applied to TFR. For most people that is 15 per cent. The performance period is the financial year 1 July 2012 to 30 June If the Board approves a payment under the SIP provisions, it will be a one-off payment based on the audited results against our published objectives. To receive payment, people must be in our employ on the date the payment is made. If a person receives an overall Does Not Meet Expectations rating in the Annual Performance Review, then no SIP payment is made. If a person has an outstanding debt with Fortescue, the debt may be offset against any potential SIP payment. 03

4 3. Incentive objectives weightings There are three categories of objectives: 1. Company 2. Team 3. Personal Everyone has five per cent of their TFR riding on the overall Fortescue results; Everyone has 10 per cent of their TFR riding on their Team s results; People in Superintendent/Technical Leadership and Manager level jobs (Bands D and E respectively) have personal objectives as well, which have weightings worth five per cent and 15 per cent of TFR respectively; and If people elect to have any payment made in Fortescue shares, then the Participating Percentage is increased by 50 per cent. Objectives Potential Payment Salary Band Company Team Personal Cash Shares A-C 5% 10% - 15% 22.5% D 5% 10% 5% 20% 30% E 5% 10% 15% 30% 45% Based on annual objectives and paid on TFR. 4. Remuneration and Nomination Committee Discretion The SIP operates entirely at the discretion of the Fortescue Board and may be terminated, suspended or amended at any time, or from time to time, in its entirety or in part, in relation to any or all employees. Notwithstanding the operation of the SIP, the Fortescue Board may make such other awards to any or all employees as the Board, at its sole discretion, may determine. Participation in the SIP and any potential payments flowing from such participation, are not warranted as part of an employee s contract of employment. 04

5 5. Participation in the SIP All permanent Fortescue direct employees are eligible to participate in the SIP. You must be employed before 1 April 2013 to participate in the FY 2013 SIP. You must still be employed with Fortescue on the date of payment to receive any incentive payment. Employees who commence with Fortescue during the financial year will have their incentive amount pro-rated based on the number of days service in the year divided by 365. People who commence employment with the Company in the last quarter of a financial year are not eligible for a payment in that financial year. Specifically, no pro-rated award will be made where a person commences employment with the Company from 1 April through 30 June of a financial year. 6. Exclusions You must receive an overall performance rating of at least Meets Expectations (in the Company s Performance Review System) in order to be eligible for any incentive payment. If you have any periods of unpaid leave during the year, these days are excluded from the number of days service in the year as a percentage of 365 days. 7. Conditions of payment 7.1 If you are made redundant during the year, the Fortescue Board, at its sole discretion, may elect to make a pro-rata payment based on days served to the date the redundancy is calculated. 7.2 If you retire during the year, the Fortescue Board at its sole discretion may elect to make a pro-rata payment based on days served to the retirement date. 7.3 If you voluntarily leave the Company s employ prior to the SIP payment date, no payment will be made. 7.4 If you are summarily dismissed prior to the SIP payment date, no payment will be made. Nothing is payable until the Fortescue Board confirms that the objectives which trigger any payment have been achieved. Specifically, employees covered under points 7.1 and 7.2 receive any payment at the same time as employees continuing in the Company s employ. 05

6 8. Changes during the financial year Payments are calculated based on the TFR established at the Annual Salary Review at the commencement of the particular financial year. For people who receive an increase or decrease in TFR during the course of the financial year, payments are made pro-rata, based on the days the varying TFR amounts applied. For people transferred, promoted or who move between salary bands A-C, D or E or who change Teams, payments are made pro-rata based on the effective date of the change and the applicable TFR amounts. 9. Category objectives The Company, through its annual planning and budgeting processes, determines numerous objectives and financial targets for achievement. The Board approves all objectives. For the Company Objectives category of the SIP, the particular objectives are Safety, Production and Costs. Each category has the same weighting. Objectives will either be met or not met. There are no Threshold or Stretch targets. For the Team Objectives category of the SIP, objectives will be set for each of the sites (currently Cloudbreak, Christmas Creek, Port and Rail) and for each Division under the Directors for Development, Operations and Finance. The Personal Objectives category of the SIP is only applicable for employees occupying roles in salary Bands D and E. The Personal Objectives will be set by the employee s Manager. The objectives under this category are of equal weighting and must be endorsed by the relevant one-up Manager for all participants. The employee s Manager may exercise discretion with regards to a particular objective s result. These results then need to be endorsed by the one-up Manager. 10. Setting objectives The Executive will recommend three or four Company and Team Objectives for the financial year to the Board. The authorised objectives will be stored by the Remuneration and Benefits Manager. Setting Personal Objectives All Personal Objectives are of equal weighting. Band D FOUR 1.25 per cent each = Total five per cent of TFR Band E FOUR 3.75 per cent each = Total 15 per cent of TFR Remember, the objectives set must be SMART: Objectives must be simple, clear and well defined. Objectives must be measureable. Objectives must be achievable. Objectives must be realistic and their accomplishment worth the money. Objectives must also consider target dates for lesser milestones linking the entire goal. Personal Objectives must be signed by the employee, the employee s Manager and authorised by the one-up Manager. All Personal Objectives must be submitted to the Remuneration and Benefits team in soft copy (for collation in the SIP Management System). The objective setting process must be completed by 31 July. If a manager fails to submit objectives for their employees, the manager may forfeit their personal participation in the SIP. Variation to any of the objectives during the course of the financial year may only be authorised by the Board. 06

7 11. Authorisation of payments The timing for the authorisation of payments is at the Board s discretion, but would not normally precede Board approval of the Company s full year results for the year of operation of the SIP. Payment will normally be after the main pay run in September. 12. Payment of incentive Based on Fortescue s audited results, employees will receive their incentive payments as soon as practicable after the Board approves the results and payment. 10 per cent Company superannuation is included in the incentive payment. Cash Payment If you elect to receive your payment in cash it will be inclusive of superannuation. The calculated cash component will be taxed at the appropriate rate and the balance transferred to your nominated bank account. Shares Payment (no tax deferral) If you elect to receive your payment in shares with no tax deferral, your calculated payment will be increased by an additional 50 per cent. The amount of shares issued or transferred will be the full value of your calculated payment divided by the volume weighted average price (VWAP) of Fortescue shares for the five trading days prior to issue. Fortescue is not required to pay superannuation on this amount. Fortescue will not deduct tax at the time the shares are issued. Instead you will receive the full amount of the calculated payment in shares. You will incur a tax liability on the calculated payment value if you elect shares. The taxable value of the share payment including the tax deducted (zero) will be reported to you on an Employee Share Scheme (ESS) Statement at the end of the financial year. Shares Payment (with tax deferral) If you elect to receive your payment in shares with three year tax deferral, your calculated payment will be increased by an additional 50 per cent. The amount of shares issued or transferred will be the full value of your calculated payment divided by the volume weighted average price (VWAP) of Fortescue shares for the five trading days prior to issue. Fortescue is not required to pay superannuation on this amount. Fortescue will not deduct tax at the time the shares are issued. Instead you will receive the full amount of the calculated payment in shares. You will incur a tax liability at the cessation point which is the earlier of a) three years from the date of issue of your shares or b) termination of employment with the Company. The taxable value of the share payment including the tax deducted (zero) will be reported to you on an Employee Share Scheme (ESS) Statement at the end of the financial year in which the cessation point occurs. Trading Restrictions on Shares Payments If receiving your payment in shares the following restrictions will apply: All share payments will be escrowed for a minimum period of 12 months; and Tax deferred share payments cannot be traded until the third anniversary of the issue date whilst you remain an employee of Fortescue. 07

8 Superannuation Salary Sacrifice You may, by prior arrangement, have some or all of your cash incentive payment paid into your superannuation fund via a salary sacrifice deduction. Elections to salary sacrifice all or a percentage of your incentive must be made prior to 1 June You should also be mindful of the superannuation contribution limits which include the 10% Company contribution AND your salary sacrifice contribution (see below). Age All employees Limit $25,000 per annum 13. Tax Summary for share-based payments Fortescue strongly recommends you seek independent financial advice in relation to electing shares as part of the SIP including the possible tax consequences of receiving your incentive in shares. As we do not deduct tax at the time the shares are issued, you will receive the full amount of the calculated payment in shares. You will incur a tax liability on the calculated payment value if you elect shares. The taxable value of the share payment including the tax deducted (zero) will be reported to you on an Employee Share Scheme (ESS) Statement at the end of the financial year. See table below for details about taxing points. The Australian Taxation Office (ATO) may also require you to remit Pay As You Go (PAYG) instalments as a result of a share-based payment. A PAYG instalment is a system for paying instalments (or regular payments) towards your expected tax liability on your business and investment income for the current income year. Age Limit Taxing point Employee Bonus Share Plan (EBSP) Tax Deferred Employee Bonus Share Plan (TDEBSP) SIP & discretionary bonuses* SIP 1. The Board determines the performance conditions have been met; AND 2. the shares have been issued or transferred to the employee Taxable value is calculated at this time 1. The Board determines the performance conditions have been met; AND 2. the shares have been issued or transferred to the employee; AND 3. the trading restriction period for the issued shares has ceased OR 1. The Board determines the performance conditions have been met; AND 2. The shares have been issued or transferred to the employee; AND 3. The employee has ceased employment with the Company Taxable value is calculated at this time# * when a discretionary bonus is paid the bonus will be taxed under PAYG withholding rules and the net pay will fund issue of shares this is because the award has been made prior to the employee making an election to have the bonus paid in shares # if the shares are sold within 30 days of the (original) deferred taxing point, the deferred taxing point instead becomes the date of disposal. 08

9 14. How will my payment be calculated? Your SIP Participating Percentage is based on your Salary Band. Objectives Potential Payment Salary Band Company Team Personal Cash Shares A-C 5% 10% - 15% 22.5% D 5% 10% 5% 20% 30% E 5% 10% 15% 30% 45% Your TFR for the calculation of the SIP will be the average of TFR over the course of the financial year (Participating TFR). For example you had a TFR of $100,000 on 1 July 2012, you were promoted and your TFR changed to $130,000 from 15 November The table below shows how your Participating TFR would be calculated: TFR From Date To Date Days in year % of Year Participating TFR $100,000 1/07/ /11/ % $37,534 $130,000 15/11/ /06/ % $81,205 Totals: % $118,740 If you have any periods of unpaid leave during the year, these days will be taken off your service days and will reduce your Participating TFR. The table below shows how this situation would be calculated: TFR From Date To Date Unpaid Leave Days in year % of Year Participating TFR $100,000 1/07/ /11/ % $37,534 $130,000 15/11/ /06/ % $77,644 Totals: % $115,178 09

10 Example 1 A Mining Operator (Salary Band B) on a SIP Participating Percentage of 15 per cent. The employee has been employed for the full 12 months of the financial year and results assume all objectives have been met. Mining Operator Example TFR: $129,084 Start Date: 15/06/2012 Service Days Worked: 365 Service % Worked: % Pro-rata TFR based on Service: $129,084 Company Objectives Potential % Value Potential $ Value % Achieved $ Achieved Safety 1.67% $2, % $2,156 Production 1.67% $2, % $2,156 Cost 1.67% $2, % $2,156 Team Objectives: Safety 3.33% $4, % $4,303 Production 3.33% $4, % $4,303 Cost 3.33% $4, % $4,303 Total Cash: 15% $19, % $19,362 Total Shares: 22.5% $29, % $29,043 10

11 Example 2 A Mining Operator (Salary Band B) on a SIP Participating Percentage of 15% who has been employed since 28 September Results assume two objectives have not been met (shown in red). Mining Operator Example TFR: $129,084 Start Date: 28/09/2012 Service Days Worked: 276 Service % Worked: 75.62% Pro-rata TFR based on Service: $97,613 Company Objectives Potential % Value Potential $ Value % Achieved $ Achieved Safety 1.67% $1, % $1,627 Production 1.67% $1, % $1,627 Cost 1.67% $1, % $0 Team Objectives: Safety 3.33% $3, % $0 Production 3.33% $3, % $3,254 Cost 3.33% $3, % $3,254 Total Cash: 15% $14, % $9,762 Total Shares: 22.5% $21, % $14,643 11

12 Example 3: A Maintenance Supervisor (Salary Band B) who has been employed for the full year. Results assume that the Team Cost objective has not been met (shown in red). Mining Operator Example TFR: $170,000 Start Date: 29/03/2009 Service Days Worked: 365 Service % Worked: % Pro-rata TFR based on Service: $170,000 Company Objectives Potential % Value Potential $ Value % Achieved $ Achieved Safety 1.67% $2, % $2,833 Production 1.67% $2, % $2,833 Cost 1.67% $2, % $2,833 Team Objectives: Safety 3.33% $5, % $5,667 Production 3.33% $5, % $5,667 Cost 3.33% $5, % $0 Total Cash: 15% $25, % $19,833 Total Shares: 22.5% $38, % $29,750 END OF DOCUMENT