|
Currently viewing: Remuneration report / Next: Risk measurement and management Remuneration report Our Corporate Statement of Remuneration Driven by our vision to create a world of sustainable healthcare, the core of our value proposition is a passion for people, health and performance, a central theme that permeates all human capital practices. This report outlines and focuses on the provisions as set out in the AfroCentric Health remuneration policy and documents the reward provisions and associated governance throughout Medscheme Holdings, Helios, AfA, AfroCentric Health Solutions and Medscheme International. The AfroCentric remuneration policy is to ensure consistent and equitable application of remuneration throughout the organisation in line with strategic objectives. The primary aim is to ensure that the Company adequately remunerates employees who contribute to the success of the Company. A core purpose of the policy is to ensure that the organisation achieves an adequate return on investment from employees. The remuneration policy aims to be an integral component in motivating the employees to remain engaged and focused on achieving core business objectives. The remuneration practice can, however, not be viewed in isolation of the broader human capital strategy. Introduction The remuneration policy includes a number of components, namely:
Remuneration governance The Board has delegated responsibility for the oversight of the Group’s remuneration practices to the Remuneration Committee (a sub-committee of the AfroCentric Health Board). The responsibility of the Remuneration Committee is in accordance with its mandate and terms of reference which include amongst others the following provisions. All decisions made by the Remuneration Committee consider the organisational performance, market conditions, reward benchmarking, accountability of the leadership team, governance and communication to all stakeholders on pertinent information. The overarching duty of the Remuneration Committee is to ensure proper alignment between the organisational strategy, human capital intent and the remuneration strategy giving due regard to legislation, King III and JSE requirements. Remuneration philosophy and principles The organisation is committed to a philosophy that ensures consistent and equitable application of remuneration throughout the organisation in line with strategic objectives. The primary aim is to ensure that the Company adequately remunerates employees who contribute to the success of the Company. A core purpose of the policy is to ensure that the organisation achieves an adequate return on investment from employees for the purpose of promoting shareholder interest. The core remuneration principles play a crucial role in guiding reward decisions, policies, processes and practices.
Remuneration design principles The organisation’s reward philosophy matured over a number of years, and is to ensure that employee rewards, which are one of the single largest investments, incurred by AfroCentric Health, is meaningful to employees and aligns to sustainable organisational and individual performance. Employee reward is invariably one of the single largest expenses incurred by any organisation (and it is therefore imperative that the principles, strategy, processes and governances pertaining to a total reward package are carefully considered, well understood and clearly documented and communicated. It is also crucial that “the spend” on total reward:
The principles, processes, governance and strategy pertaining to our total reward package is carefully considered and reviewed and benchmarked regularly (at least on an annual basis) and adjusted to drive optimal performance. A holistic integrated approach to remuneration strategy is adopted which includes the following elements:
In relation to the remuneration strategy, focus was placed on the following components this financial year:
Performance management principles The remuneration of all employees inclusive of Executives is directly linked to performance indicators as approved annually by the Board and reviewed annually. Key financial and operational targets are aligned but further more values-based indicators also form part of the executive scorecard. A revised performance management methodology was successfully implemented in this financial year which included a cascading of objectives to ensure that all employees understood their line of sight and contribution to the Group objectives. The performance management practices were also enhanced with the implementation of a quality review process to ensure the correct level of objectives are set for various roles aligned to the overall strategic intent. Final moderation of performance appraisals was also implemented and informs the setting of future objectives and targets, thus ensuring the performance bar of the organisation and individuals are continuously improved. Remuneration mix Remuneration within the organisation comprises total guaranteed package and variable pay, which are clarified below. The remuneration mix does, however, vary dependant on level and role in accordance to market benchmarks and operational context. The organisation's remuneration supports the philosophy that individuals should be rewarded based on the performance of the organisation. Guaranteed pay focus on the delivery of operational needs and objectives. Variable pay for Senior Managers and Executives focus on rewarding on the strategic objectives and the achievement of financial and non-financial targets and stretched targets. Where long-term incentives and share-based rewards have been issued the focus has been on rewarding long-term sustainable performance and mechanisms in the form of deferral and forfeitures have been incorporated to Guidelines on guaranteed pay Total cost to company (“CTC”) has been adopted by AfroCentric, of which guaranteed pay is the major component, and forms a significant portion of total operating costs. It is therefore imperative that guaranteed pay is Our Corporate Statement of Remuneration managed efficiently and wisely. To achieve effective cost management, the Company manages guaranteed pay levels using CTC, which incorporates base pay, car allowance, pension, medical aid and other optional benefits. This policy has been adopted to ensure that the cost of the remuneration package paid to employees is controlled by the Company, and does not include open-ended liabilities where the cost of a benefit is determined either by levels of utilisation or by external pricing factors. Furthermore, CTC represents a generally accepted marked practice for remunerating employees and accordingly allows for accurate and meaningful benchmarking of remuneration packages. The Company operates within the healthcare sector with a high level of skills shortages in various disciplines, in which highly skilled employees are a must to have, and yet are usually extremely mobile and sought after, both locally and internationally. These employees are thus very difficult to motivate, reward and retain. Hence, AfroCentric’s remuneration policy is to determine a broadband, benchmarked to the market median. This broadband is then further segmented into narrow bands. To attract the right skill set line managers would make the pay decision as to where to pay based on the candidate qualifications and competencies. Pay decisions to retain skill would be guided by using a differentiation model and mainly based on the employee’s long-term performance in that role. Taking cognisance that companies have different annual review cycles which predominantly are one of January, March, July and October, salary data is projected forward when the information is pulled from the survey house. The projection percentage used is based on influencing economic factors and guidance is taken from AfroCentric Health’s remuneration consultants. This projection factor ensures that we do not lag the market for a number of months. All benchmarking is done on the basis of total Overall increases will typically reflect the market benchmark increases, with individual increases varying according to an assessment of individual performance. Remuneration of Executives is determined based on the level of accountability, complexity, and nature of the role which is sized relative to the organisation's turnover, number of employees, market capitalisation, assets, net after tax profitability, wage bill and number of employees benchmarked to the external market. Key principles that govern the remuneration of all employees including Executives in the Group are:
The following sources are utilised to benchmark to: Guidelines on variable pay (short term incentives) The general principle of incentives is that it is performance-based and is discretionary. No employee has the right to be paid an incentive. The intention of the Management Short Term Incentive Scheme (“MSTIS”) is to provide AfroCentric Health with a mechanism to drive the required behaviour and results, to align management to the Group strategy and key objectives as well as a mechanism to accelerate AfroCentric’s business and financial performance. The scheme is underpinned by the following objectives:
All objectives are confirmed by the committee, which satisfies itself that the performance criteria utilised are relevant, stretching and designed to enhance shareholder value. The committee approves annual management performance incentives before their payment. The key drivers of the scheme are:
Below executive level, annual incentive bonuses for senior and middle management and key talent are entirely discretionary and are paid out at various levels ranging from 15% to 40% (depending on individual performance) of CTC, only if the targeted Group financial performance targets have been met. The scheme contains a deferred element and specific clauses. Long-Term Share Based Scheme The original share allocation as granted to certain Executive Directors as part of the warranty conditions, as set out in the Sale of Share Agreement between the vendor consortium and AfroCentric, as reported in the previous report refers. Based on the final results and agreement reached between the vendor consortium and AfroCentric, 90% of the warranty target was achieved. Participants therefore receive 80% of their allocated shares as set out in their original share allocation letter. In order to further incentivise the retention of Executives, an offer was extended to all participants who elect to voluntarily defer a portion of their 80% allocation. In return participants were allocated an additional number of shares (from the original allocation of 20 million shares) if they elected to defer the full 80% allocation or a portion thereof. The enhanced allocation of shares (20% balance of the original 20 million shares), was conditional based on deferral of shares over a period of two to three years. Non-Executive Directors' remuneration The Company’s policy on remuneration for Non-Executive Directors is that, as a general guideline, this should be:
All other members receive a fee per meeting attended and also dependent on the role fulfilled for the various sub-committees of the Board. At the Annual General Meeting held in February a 10% increase in the Non-Executive Directors’ board fees were approved. Committee decisions required annually The following are some of the decisions required to be made by the committee (and where appropriate the Board) with regard to this remuneration policy:
Remuneration of the three highest paid employees who are not Directors
|
|
|
|
| AFROCENTRIC INTEGRATED ANNUAL REPORT 2014 |