During a Strategic Labour Forum meeting held in December 2016, Management indicated that they wish to consult with Labour on a revised Incentive Scheme for Transnet.
The first meeting was held on the morning of 24 January 2017, where Management informed Labour of their intention to continue enforcing the culture of a unified Transnet, “One Transnet”.
Management also appointed PWC who conducted research based on International Logistics, Freight and Rail companies in 72 countries, on how incentives are paid within the markets. The old paradigm would be “budget orientated”, the new paradigm is “action adapted”.
The investigation according to PWC also proved that recognisable performance measures be applied to short-term incentives and are categorised into five (5) pillars: –
- Customer Focus
- Environment and Community (e.g. Safety)
- Internal process (e.g. Efficiency)
- Employment Performance
- Financial Performance (e.g. Ebitda)
Management also reiterated that Transnet must ensure sustainability by focusing on improving: –
- Cash Generation
- Productivity/Efficiency
- Customer Centricity
- Safety Performance
- Individual Performance/Contribution
Management were requested to supply Labour with an example of their proposed formula using 2015/2016 Financial Results.
THE PROPOSED FORMULA
The formula to determine affordability is bench mark sharing of 8.5% x Ebitda x Primary Modifier. Using the above formula, the amount for Incentive Bonuses using the results of 2015/2016 Financials, would have equated for R1 708 million.
Payment of the Incentive will be capped, in instances where the payment will result in;
- The Group breaching key debt covenant ratio’s; or
- The Group being placed in financial distress (i.e. where it affects the credit rating); or
- A nett loss after tax.
The Incentive Pool Fund will fund all Incentive payments.
The Formula to calculate the Incentive per employee was proposed as follows: –
Annual pensionable salary x STI Eligibility % x Primary Modifier (Group Business Performance) x Secondary Modifier = Incentive Bonus.
- The sum of all the individual incentive calculations must be affordable for Transnet.
Management further stated that if the above was implemented using the above formula to all operating divisions. It would mean that 38 714 employees would have received more and 13 465 employees less than they were paid, in terms of Incentive Bonuses for the 2015/2016 Financial Year.
It was clear from the presentation that the above proposed scheme will thus replace all current schemes e.g. Containers, Transnet Engineering, etc.
Labour requested Management to supply Labour with the current averages earned in the various operation divisions for the Financial Year 2015/2016.
The next consultation meeting is scheduled for 22 March 2017.
Members will be kept informed as the process unfolds.
Yours sincerely,
SA Harris
GENERAL SECRETARY
