Motivation

GRI 202-1

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Financial Incentives

Among the HR Policy tools adopted in Zarubezhneft JSC, there is a differentiated approach applied for determining the remuneration amount based on the extent of employee involvement in achieving the Group’s strategic goals, which allows for attracting, retaining, and motivating employees with the expertise and level of performance required for Zarubezhneft Group’s business objectives to be achieved with minimum cost.

The Group implements flexible motivation programs covering both tangible and intangible incentives.

The amount of the fixed and variable part of an employee’s compensation depends on the following factors:

  • position level, as expressed by the corresponding pay grade;
  • level of professional expertise and labor efficiency, as reflected through granting a certain professional status to an employee;
  • work performance and achievement of the objectives set for the reporting period, as reflected in the amount of the remuneration variable for that period;
  • level of remuneration for comparable positions in the labor market (competitor companies), and Zarubezhneft Group’s target position in the labor market for this position level.

When determining the Group’s target position in the labor market, the following approaches are applied:

  • selection of a labor market appropriate for a certain group of personnel (Moscow, regional, and international labor markets);
  • identification of key groups of employees and the positions for which the Group is ready to ensure the wages/salaries higher than the average ones on the relevant labor market;
  • for other employees, the Group is ready to provide average salaries as on the relevant labor market.

Therefore, Zarubezhneft JSC consistently develops the following areas:

  • improving the system of employees’ labor payment and motivation;
  • improving and developing an integrated headcount planning system.

Within the Group, the Integrated Labor Payment System (ILPS), introduced in 2013, remains in place and in force.

The ILPS determines a uniform procedure for setting employee salaries based on a single grading line, reflects the Company’s business interests and priorities, and ensures that each an employee’s annual remuneration is linked to their achievement of KPIs.

The IPLS provisions are formalized in the Model Regulation on Employees’ Labor Payment and Motivation; newly established subsidiaries develop their regulatory documents taking into account the standard requirements, as they join the system.

In 2019, due to massive business expansion and entering new projects (in Uzbekistan and Egypt), Zarubezhneft Group Personnel Relocation Policies were developed and approved, establishing unified rules to govern personnel relocation, remuneration and benefits, as well as to protect the interests of Group employees and their family members on rotation to new projects.

The basic securities and remunerations included in the Relocation Policies are:

  • Travel allowance and relocation allowance;
  • Visa support, ticketing, securing work permits;
  • Provision of accommodation;
  • Refund of expenditures for kindergartens and schools;
  • Provision of voluntary health insurance to employees and their family members;
  • Pension fund.

The key components of the Relocation Policies are:

  • guaranteed employment of each Zarubezhneft Group employee after having completed his/her work at the project;
  • if there is no opportunity to provide the above-mentioned employment, the Group shall pay monetary compensation to the employee.

In order to attract and retain key managers in Zarubezhneft Group, a complex system of motivation was developed, comprising the following components:

  • fixed remuneration (title wage, increments, and supplements in accordance with the law);
  • month-end bonuses based on achieving performance targets;
  • year-end bonuses based on achieving KPIs.

The Group regularly analyzes inflation and consumer price index trends, based upon which decisions are made as to revise (indexation) employee salary levels.

The minimum wage is set not lower than the cost of living in the region of activity.

An integral part of the Group’s remuneration system is a social support program for employees and their family members, which is taken into account when evaluating the overall attractiveness and competitiveness of the remuneration to be proposed.

Zarubezhneft Group has approved the Integrated Vision of Lump-sum Payments and Social Policies, the purpose of which is to provide a decent level of medical services, assistance to employees facing various adverse circumstances, compensation for earnings lost upon retirement, and support to the Group’s retirees.

Uniform requirements to subsidiaries’ benefits plans are formalized in the Model Regulation on Social Securities for Subsidiaries’ Employees. Each subsidiary selects and approves, based on its employees’ needs and its own financial capacity, the optimal package of benefits, securities, and refunds attributable to the employees.

In order to maintain employee health, the Company organizes reservations at health resorts in Crimea. Employees are given an opportunity to purchase health resort vouchers for themselves and their family members, which are to be partially refunded by Zarubezhneft JSC; large families, along with families with children under 14, are given priority in this regard.

There were positive trends in welfare benefits in 2019. Welfare benefits increased by 8% over 2018; and excluding JV Vietsovpetro retirement benefits, the welfare benefits increase amounted to 10%, as shown below.

In 2018, the amount of social benefits per Group employee decreased relative to 2017, which was due to a significant share of retirement benefits in connection with early retirement paid in 2017 to JV Vietsovpetro employees.

Personnel Costs by Operating CountryPersonnel costs consist of salary fund and social payments. Social payments include material assistance, pension payments, payments for single parents, maternity benefits from the enterprise, health resort voucher allowance, etc., %
Operating country Actual
2016 2017 2018 2019
Salary Fund Social Payments Salary Fund Social Payments Salary Fund Social Payments Salary Fund Social Payments
Total Group 89 11 88 12 88 12 88 12
Russia 94 6 92 8 89 11 89 11
Republic of Srpska (Bosnia and Herzegovina) 84 16 89 11 91 9 91 9
Republic of Cuba 94 6 93 7 95 5 93 7
Socialist Republic of Vietnam 82 18 77 23 88 12 87 13
Republic of Uzbekistan 86 14
Social Payments by Operating Country
Operating country Actual
2016 2017 2018 2019
Russia, thousand RUB 592,934 880,210 1,007,159 1,070,528
Socialist Republic of Vietnam, thousand USD 23,646 28,782 13,338 19,424
Republic of Srpska (Bosnia and Herzegovina), thousand EURO 2,474 1,526 1,387 1,238
Republic of Cuba, thousand EURO 66 87 57 94
Republic of Uzbekistan, thousand RUB 3,816
Welfare Benefits per Employee, RUB
Welfare Benefits per Employee, RUB

Intangible Incentives

Intangible incentives constitute an inherent part of the personnel motivation system. In order to encourage employees and labor groups to significantly contribute to Zarubezhneft JSC’s development, and achieve prominent production, financial and economic indicators, and to improve the corporate culture, the Company established special titles such as “Honored Employee of Zarubezhneft JSC”, “Long-Service Worker of Zarubezhneft JSC”, and awards like Zarubezhneft JSC Certificate of Appreciation and Zarubezhneft JSC Certificate of Acknowledgment.

Over the last year, 236 Zarubezhneft Group employees won departmental and corporate awards.

In 2019, the contest “Best in Profession” was held at the Zarubezhneft-Dobycha Samara LLC production facilities in the city of Samara. Participants from Zarubezhneft Group subsidiaries, winners from the enterprise-level selection stage, demonstrated their knowledge and skills in the theoretical and practical parts of the contest in six categories:

  • Operator of Oil and Gas Production;
  • Operator of Dehydrators and Desalters;
  • Electrical/Gas Welder;
  • Locksmith Repairman;
  • Passenger Vehicle Driver;
  • Chemical Analyst.

Winners were also determined in the additional categories of Best in Production System and Best in HSE.

Traditionally, foreign employees of Zarubezhneft Group take part in the contest. In the financial year, the JV Vietsovpetro specialists from the Socialist Republic of Vietnam supported the international nature of the event by participating in three contest categories and took prizes in two categories. In the team competition, the winners were once again employees of Zarubezhneft-Dobycha Kharyaga LLC, having shown a traditionally high level of training. The contest winners were awarded diplomas, monetary prizes, and gifts.

Another significant event is the annual public showing Best Facility contest, held among Zarubezhneft Group facilities that can claim the title “Facility of High-Standard Operating Practices” in two categories: Oil, Gas, Water Treatment and Transportation; and Petroleum Production. The contest contributes to shaping a responsible attitude towards work, increasing labor performance and quality of work, improving labor discipline and development of corporate labor culture, and promoting environmental protection.

In 2019, the title of “Facility of High-Standard Operating Practices” was awarded to the following facilities:

  • in the category Oil, Gas, Water Treatment and Transportation, to the Chemical Analysis Testing Laboratory of Zarubezhneft-Dobycha Kharyaga LLC;
  • in the category Petroleum Production, to Well Cluster No. 5 of JC RUSVIETPETRO LLC’s Zapadno-Khosedayuskoye oil field.

Zarubezhneft JSC holds a Best Employee contest on a quarterly basis to determine the employees with maximum influence on the Company’s results in three focus areas: development of technological expertise, enhancement of organizational performance, and fulfillment of Shareholder’s requirements and expectations. At the yearend, the Best Employees with a proactive attitude to life are determined.

Number of Awarded, Persons
Types of awards Total Including foreign citizens
Departmental 34 33
Corporate 202