Untitled - PRIME Gold

106 2005 NORILSK NICKEL • ANNUAL REPORT •NORILSK NICKEL • ANNUAL REPORT •2005107••• Personnel motivationMonetary incentives, which form the key element in the personnelmotivation system, are based on a comprehensive compensationpolicy which defines personnel compensation mechanismsand covers salaries and various social and monetarybenefits.Salaries and wages are linked to performance and labor productivity.In determining the level of remuneration the Groupadheres to a concept of offering a competitive salary withinthe local labor markets. This ensures the attraction and retentionof highly motivated and professionally qualified personnel.Labor costs of the Group's entities presented in the IFRS financialstatements as part of cost of metals sold (mine and concentratingcosts, smelting costs, electrolysis and refining costs)and selling, general and administrative expenses amountedto USD 965 million in 2005.To increase the efficiency of labor costs, and taking intoaccount changing production needs and external conditions,corporate remuneration and incentive systems are continuouslybeing improved to ensure a closer link between individualand team performance and the level of their compensation.During 2005, base rates and wages were increased at theTaimyr Peninsula entities and at OJSC Norilsk-Taimyr EnergyCompany (NTEC). Performance management instruments werefurther developed including employee bonuses paid from collectiveincentive funds and bonuses to company managersbased on the achievement of the Key Performance Indicators;the Group continued to successfully implement labor agreementsbased on the system of grades and personnel efficiencyassessment and ensuring the retention of key staff andincreased motivation towards efficient performance.Over the reporting period, an increase in labor productivity wasachieved through the efforts of the Group's employees andmanagement, allowing the Group to retain a leading positionby labor remuneration among the largest Russian miningcompanies. The average salary of staff within the Group'sas compared to 2004 increased by more than 11% in 2005to USD 1,195 (RUR 33,800).To motivate employees for long-term productive labor andensure their social adaptation upon retirement from the Group,the compensation package includes a corporate pension paidto participants in the program Joint Corporate Pension. Thispension is formed from joint contributions to a non-governmentpension fund by employees and the Group. The entitlementfor the plan is determined on the basis of labor record.At the end of 2005, 2,630 employees of the Group wereenrolled in the program, of which 310 had the corporate pensionerstatus.In the reporting year the Taimyr Peninsula entities launched anew social program of beneficial loans to employees. Staffeligible for the program includes the best employees of theGroup. Since its conception, 152 employees have enrolled inthe program.Timely and adequate moral incentives for labor achievementspromote employee self-awareness of their involvement and significancein attaining corporate goals; they stimulate interesttowards improving the performance of a separate divisionand the company as a whole.In 2005, 5,246 of the Group's employees were awarded fortheir outstanding productivity, successful implementation ofinnovative projects and many years of conscientious work.A significant motivation effect of the moral incentives isachieved by surrounding the celebrated employees with anatmosphere of honor and respect. Such distinguished employeesare invited as honored guests to events held in labor collectivesand set the pattern for the younger generation ofstaff. Celebrated employees are awarded the priority right toparticipate in professional development programs (varioustypes of training, including abroad) and to receive additionalsocial benefits and guarantees.••• Social partnershipRelationships with employees are built in accordance with thesocial partnership system developed and continuously evolvingwithin the Group.The regulation of social and employment relations betweenemployer and employees is mainly performed through collectiveagreements. The system of collective agreements hasbeen expanded and enhanced by the adoption in 2005 of anagreement on the regulation of social and employment relationsat the Group's entities in 2006-2008, setting the basicstandard for the relations between employer and employeesin the social and employment sphere for all the companies ofthe Group located in the cities of Norilsk and Dudinka.Further improvement of the social partnership mechanismsis achieved through the development of direct dialog betweenemployer and employees, ensuring direct communicationand enabling the Group to promptly address urgent issuesdirectly at the levels at which they emerge and to extend thesemechanisms to all the entities of the Group. For these purposesthe Corporate Social and Labor Council of the Group and anew body of stakeholder communication – the Corporate Forumof the Group's entities located in Norilsk and Dudinka – wereestablished in 2005.Various collective bodies have been created to unite and coordinatethe efforts of management and employees to developand implement effective solutions to issues vital to the Group'soperation and development. For example, the Group operateslabor safety commissions, with members selected on a paritybasis. MMC Norilsk Nickel operates and continuouslyimproves the system of in-house communications, one of themain tools of which is the institute of social and labour contactcentres.••• Recreational and labor environmentimprovement programsThe severe climate of the Far North and specific labor conditionswithin the Group's plants require special care to be givento employee health issues. For many years the Group'sentities have been implementing special healthcare and sanatorium/resorttreatment programs for employees and theirfamily members.Healthcare activities are mainly carried out at recreation centersowned by the Group. Healthcare and sanatorium/resorttreatment programs for employees and their family membersare jointly financed by the Group, the employees themselvesand state social insurance programs. This provides for a morecareful attitude of the part of employees towards their healthand increases their responsibility to undergo timely preventive,recreational and medical procedures.In 2005, the number of discount vouchers for sanatorium/resorttreatment provided to employees of the Group's plants locatedin the Far North and to their family members was 36 per100 employees.Employee participation in recreational programs and improvementof sanatorium/resort treatments lead to a decrease ofillness frequency and an increase of employees' individual performance.According to the previous experience, employeesthat underwent the required recreational and medical proceduresin the Group's sanatoriums had an absence rate of15%–30% less than other employees.Under the special-purpose Social Amenities at ProductionFacilities program effective from 2003, the Group performsrepairs and renewal of social and labor objects at its majorentities. In 2005, the Group commissioned 4 repaired andreequipped factory canteens, repaired amenity rooms at 6 entities(cloakrooms, shower rooms, aid posts), reequipped canteensand lunchrooms at 5 entities, purchased 40 mobilemakeshift modules accommodated specifically for rotatingwork schemes in the Far North and continued to equip theGroup's gyms with trainers and sports equipment.OVERVIEW OF HUMAN RESOURCESAND SOCIAL POLICIES10