Policy

Mandatory
For internal use
November 2011
Nestl Total Rewards Policy
Policy
Mandatory
For internal use
November 2011
Issuing department
Corporate Compensation and Benets
Target audience
All employees
Approver
Executive Board Members
Repository
All Nestl Principles and Policies, Standards and Guidelines
can be found in the Centre online repository at:
http://intranet.nestle.com/nestledocs
Copyright and condentiality
The content of this document may not be reproduced, distributed
or disclosed to third parties without proper authorization. All rights
belong to Nestec Ltd., Vevey, Switzerland.
2011, Nestec Ltd.
Design
Nestec Ltd., Corporate Identity & Design,
Vevey, Switzerland
Production
Altavia Swiss
Paper
This report is printed on BVS, a paper produced
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1 Nestl Total Rewards Policy
As the leading Nutrition, Health and Wellness
Company, Nestls name is instantly recognisable
throughout the world. But what attracts new
hires and keeps current employees engaged is
not only remuneration and benets based on
solid performance. It is the hard earned value and
trust that our name brings to those who work
with us; the relationships with our line managers
and fellow workers; recognition and experiences
enjoyed while working for a diverse global
company; possibilities to learn and grow. These
are as a whole, the Total Rewards we receive.
It is important to remember that Total
Rewards need to correspond to what is
valued by employees in each and every Market
in alignment with our Nestl principles,
culture and the aspirations of our current
and potential new employees.
Total Rewards must be in line with Nestls
corporate governance framework and applied
within the local, legal and socio-economic
environment. There is a certain degree of
discretion in designing programmes to ensure
compliance with prevailing legislation or
comparability with local trends and practices. It
is also important that the Total Rewards picture
should be simple to understand and competitive.
It is Nestls expectation that every employee
has a full understanding of the specic
characteristics of Total Rewards and how they
are established and maintained throughout the
Group. This Nestl Total Rewards Policy aims
to give this understanding and to explain how
Nestl is committed to giving each employee
the opportunity to grow, evolve and contribute.
Jean-Marc Duvoisin
Deputy Executive Vice President
Introduction
2 Nestl Total Rewards Policy
Nestl, however, is aware that in some
countries legal minimum wage levels are not
always adequate to fulll the basic needs
of a worker. Nestl, therefore, is committed
to periodically verifying that the lowest level
of salaries and benets are not just complying
with local law, but are competitive in allowing
employees to cover their needs according to
local standards of living, further claried in the
Nestl Employee Relations and Conditions of
Work and Employment policies.
Nestl places strong emphasis on the
simplicity and exibility of its Total Rewards
programmes. Programmes may vary within
Markets depending on the external environment,
government-mandated policies, and the
prevailing tax regime.
The specic elements valued by employees within
each Market, allowing us to attract, retain and
engage our employees, will include:
Fixed pay
Variable pay
Benets
Personal Growth and Development
Work-Life Environment
Reward principles are inuenced by individual
performance as well as various factors such as
competitive market practices, cost considerations
and business results achieved both locally and
globally. A Total Rewards programme should
encourage the same coherent approach within
the organisation, both at the Group and local
level. Human Resources, Pensions and Finance
should be involved to balance all considerations.
Nestl has a long-term vision of being
competitive in the market place. In this context,
the total employee package needs to be
taken into consideration. This means that all
the components of Total Rewards have to be
established in harmony with each other.
2. Nestl Total Rewards
Nestl in the Market (NiM) principles,
managed by the NiM Compensation and Benets
Centre of Expertise in the Market, need to be
a prime governance consideration in order to
ensure consistency in the application of rewards
across all Businesses in the Market.
In line with Nestls Employee Relations
Policy, the Nestl Total Rewards programmes
must be established within the social and
legal framework of each Market, be fair and
constructive and based on the principle of good
faith. In this respect, Nestl continues to maintain
its commitment to follow all Collective Bargaining
Agreements (CBAs) agreed to in each Market.
If any interpretation of this document is in
conict with a CBA, the CBA prevails.
The purpose of the Nestl Total Rewards Policy
is to provide a reference for all employees to
understand the framework on which our Total
Rewards are structured and the principles on
which they are based.
The Nestl Total Rewards Policy is aligned with
our Nestl Corporate Business Principles and all
other relevant Policies, Guidelines and initiatives.
Corporate and Local Market Context
The principles outlined in this global policy
provide the framework within which individual
markets can create local programmes that
meet their business requirements: Focusing
on attracting and retaining the right talented
employees, building a high-performance culture
and ensuring a highly-engaged workforce
that achieves sustainable optimum business
performance and results.
Rules regarding eligibility and service
requirements will be established in that context.
Performance requirements, determining the
level of rewards, may also apply.
1. Purpose & Scope
3 Nestl Total Rewards Policy
Salary Review & Salary Decision Factors
Base salaries should be reviewed periodically,
normally once per year. However, under
extraordinary circumstances, an additional review
could be considered. The annual salary review
date is 1 April. Salary reviews should be guided
by individual performance as well as internal
equity and external competitiveness. In addition,
the overall situation of the employee such as
potential, future development plans, the pace
of previous increases and recent salary
adjustments should also be kept in mind when
deciding on a salary increase.
Across-the-board increases should remain
an exception, but may be granted when stipulated
in a CBA or under extraordinary situations such
as high ination or mandatory general increases,
with the appropriate approval.
The evolution of salaries is fundamentally
dependent upon the performance of the
Market and business results within the socio-
economic context.
3.2. Cash Allowances
Cash allowances form part of the employees
xed remuneration, as may be required within
the local competitive and/or legal context.
3.1. Base Salary
The Base Salary is the foundation of total
remuneration. In most cases, the other elements
of remuneration are built on or linked to it.
Competitive Positioning
Regular surveys are used as a benchmark to
determine our competitive positioning in the
marketplace. Nestl is committed to a pay
for performance culture which endeavours
to differentiate pay levels on an individual
performance basis. Base salaries and wages
are determined locally within the corresponding
salary structure, which should be set at a
level reecting local market practices, slightly
above the median. Actual base salaries and
wages, however, can be set between the market
median and the third quartile of comparative
competitor levels obtained through appropriate
and reliable survey providers. The exact salary
positioning depends on the salary decision
factors developed below.
The local competitive market is dened as a
group of companies made up of Nestls prime
competitors. These are multinational companies
in the Fast Moving Consumer Goods sector, as
well as any other relevant competitors in the
local employment market.
Salary Structure
Nestl strives for simple wage and salary
structures that avoid unnecessary complexity.
They must offer exibility to adjust to specic
requirements and circumstances.
The Markets are responsible for establishing
local salary structures that are consistent with
prevailing market practices and corporate
guidance. Business strategy and objectives
should also be taken into consideration.
Nestl in the Market (NiM) principles, aligning
compensation and benets practices between
Globally Managed Businesses and other
operating companies in the Market, must
always apply.
3. Fixed Pay
4 Nestl Total Rewards Policy
of a minimum bonus. The responsibility for the
design of STB plans lies with the Market within
the framework approved at corporate level.
4.1.2. Sales Incentives
Sales Incentive Schemes are designed for
sales staff or individuals who inuence sales
operations in rewarding the achievement against
sales targets. The core objective is to motivate
sales staff to outperform both qualitative and
quantitative sales targets.
Design and structure of Sales Incentives
Schemes remain the responsibility of the local
Markets/Businesses, and employees who
participate in a Sales Incentive Scheme do not
participate in the STB plan.
4.1.3. Other Variable Remuneration Plans
Other variable remuneration plans for a dened
group of employees, based on predetermined
measures, are also possible. Emphasis should
be placed on both quantitative and qualitative
objectives, but in some circumstances qualitative
objectives can be a primary consideration.
4.1.4. Special Payments
It is also possible to pay out non-recurring,
one time spot-bonuses or awards to individuals
in situations of extraordinary achievements,
e.g. successful completion of a critical project.
This should remain an exception and be
approved by appropriate Business and HR
Management levels.
4.2. Long-Term Incentives (LTI)
Nestl puts strong emphasis on sustainable
growth and performance, and the creation of
value for our Company. By linking rewards to
the success of Nestl, the company not only
strengthens long-term performance, but also
allows the attracting and retaining of the best
talents. This strategy is the underlying principle
for the design of Long-Term Incentive Plans (LTI).
LTI Plans are designed and driven by Corporate
HR and remain a key retention tool for senior
management. Equity or cash-based programmes
provide incentives to selected employees for
reaching longer-term value objectives of the
Group or business unit.
The purpose of variable remuneration schemes is
to stimulate the entrepreneurship of participating
employees and to ensure that they are motivated
to perform even beyond expectations. The
objective is also to support employees
participation in the successes of the Company.
The individuals eligibility for a variable pay
scheme depends on the framework dened
at Group level and local Market conditions.
As a guiding principle, employees should
be part of only one single variable pay scheme,
either Short-Term Bonus, sales incentive or
other variable remuneration plans.
4.1.1. Short-Term Bonus (STB)
The Short-Term Bonus (STB) provides an
opportunity for recognising employees who
deliver tangible results for the business,
against agreed targets. STB target levels are
expressed as a percentage of Annual Base
Salary in line with the corresponding framework
determined at Group level and prevailing local
Market practices.
Objective Setting and Alignment
Alignment of objectives and Short-Term bonus
payout is based on achievements against
expected Collective and/or Individual factors
dened at the beginning of the performance
period, typically a calendar year. In general,
a balanced combination of Collective and
Individual objectives is recommended.
To successfully deliver our business strategy
and support our Performance Culture, the
objectives must be based on the Business
Units strategy, which is aligned with the Nestl
Strategic Performance Framework.
Collective objectives are based on business
targets shared with others, cascaded from
a higher level which implies an indirect and
collective responsibility. In addition, the
STB should include individual business or
functional objectives with direct and individual
responsibility, e.g. quantitative or qualitative
business or individual performance objectives,
quality standards, or sustainable improvements to
methods and processes as outlined under Result
Focus in the Nestl Leadership Framework.
Objectives are dened by the manager in
agreement with the employee, in a Specic,
Measurable, Achievable, Realistic, and Timely
(SMART) way.
Short-Term Bonus pay-out
Short-Term Bonuses are delivered as a cash
payout based on achievement of targets against
objectives. There is no guarantee for the payout
4. Variable Pay
5 Nestl Total Rewards Policy
Disability and Life Benets
Short and/or long-term disability benets as well
as survivor and/or life benets are provided
in the form of income and/or lump sum payment
to support employees through difcult times.
5.3. Other Benets
Vacation
Markets may offer vacation time in excess
of legal requirements, providing employees with
additional leisure time to use at their discretion.
Employees are encouraged to take their annual
vacation entitlement, which is provided according
to Market policy.
Perquisites
Perquisites or fringe benets, such as company
car, car allowances or company transportation are
provided in line with local competitive practices.
As an Employer of Choice, Nestl wishes
to provide comprehensive and competitive
Employee Benets as part of the Total
Rewards package:
Benet programmes represent a substantial
nancial commitment on the part of the
Company and often also of the employees.
To leverage the value of the benets offered
to our employees, and whenever appropriate
and in line with local competitive practice,
employees can be given, the exibility to
choose the level and/or type of benets
best suited to their individual needs,
circumstances, family situation and/or
life cycle stage.
Benet programmes have to be affordable and
sustainable. Their design and delivery must
be in line with Company guidelines as well as
with local conditions and practices in each
country, and at all times compliant with local
mandatory and social security requirements.
Depending on the specicity of each Market,
the benet programmes offered may include
some or all of the following benets:
5.1. Pension and Retirement Schemes
Such benets aim to support employees in
ensuring an adequate standard of living after
retirement, according to local standards and in
addition to State/social security benets, personal
savings and/or other individual retirement
nancial arrangements.
5.2. Insurance Benets
Insurance benets aim to provide protection
against risks such as illness, accident, death,
and disability with the accompanying nancial
consequences. Depending on market practice
and requirements, these programmes are usually
provided to the employees on a contributory
basis, in addition to the occupational and/or
mandatory/social security workers compensation
benets in case of work-related disability,
accident or sickness.
Medical Benets
Medical benet programmes aim to provide
access to quality healthcare and/or health
insurance benets in case of illness and/or
accident. Nestl also encourages all employees
to participate in the employee wellness, health
promotion and prevention initiatives as well as
other programmes offered in the Markets
(see also Work-Life Environment section).
5. Employee Benets
6 Nestl Total Rewards Policy
6.3 Training and Learning
To achieve competitive superiority through
our people, Nestl is committed to lifelong
learning, which is a three-way partnership: The
individual who is responsible for his/her own
development; the Manager who encourages,
coaches and mentors that development and
the Training and Learning team who completes
the triad by offering learning consulting,
products and services to assist leaders,
employees and the business in their quest for
continuous improvement.
Performance and development discussions
act as the critical link to help determine and
recommend the types of training, resources, and
tools made available to each employee.
6.4 Recognition
Nestl encourages the recognition of
special efforts for achievements, as well as
the loyalty and long-term commitment
of its employees, contributing to the overall
success of the Company. Formal or informal
recognition programmes aim to reward,
on the spot, individual and teams contribution,
usually without predetermined goals or
performance levels.
Awards can be cash (please see Special
Payment, 4.1.4) or non-cash (e.g. non-nancial),
and in the form of verbal recognition, trophies,
certicates, plaques, dinners, tickets, gift
vouchers etc. They can be delivered and
communicated one-to-one or through more
formal, company-wide recognition programmes.
Nestl endeavours to foster a culture where
career and development opportunities are a
signicant component of its Total Rewards
and where growth and career advancement
opportunities are linked to performance, potential
and the appropriate differentiation of rewards.
Managers and supervisors have a key role to
play in inspiring, motivating and engaging their
employees, providing guidance and day-to-day
coaching to support them in their performance
and development goals.
6.1 Performance Evaluation
Our ability to measure the growth potential of
each employee is realised in part through their
ability to achieve objectives, cascaded down
from the Nestl Roadmap and Zone, Business or
Market Blueprints. These align all performance
objectives in a clear, concise and strategic
manner.
Performance evaluation measures and
recognises individual performance in a fair and
transparent manner. Through performance
evaluation, employees know what to focus on in a
given performance year. Whilst WHAT is achieved
in terms of objectives is important, Nestl puts
an equal emphasis on HOW these objectives are
delivered, by focusing on some key behaviours
that are in line with Nestl values and principles.
Through performance evaluation, employees
should also receive honest and regular feedback
in order that they may continually improve.
Performance evaluation is a core pillar
which can enable a clear direct link between
performance and rewards.
6.2 Development and Career
Employees have regular discussions with their
managers about their long-term aspirations,
ambitions, career opportunities and development
needs. Employee action plans are implemented
to engage employees to perform better, fulll
their potential and to reach their long-term
aspirations, taking advantage of the learning
opportunities available.
In line with Nestls multicultural and
international essence, international careers may
be made available to appropriately qualied
employees, and create further opportunities for
advancement in an employees career.
6. Personal Growth and Development
7 Nestl Total Rewards Policy
individual circumstances such as life stages/
cycles are taken into account. The Flexible
Work Environment at Nestl guidelines
provide directions for each Market to
implement in line with their local business and
cultural context.
Lifestyle and Wellness programmes,
whereby, and wherever feasible, the Company
endeavours to provide access to various
forms of employee assistance programmes
including dependent care, counselling,
tness centre afliations, smoking
cessation programmes, stress management
programmes, health screenings and other
workplace convenience services.
A safe and caring environment where safety
and health is a fundamental value.
An inspiring Nestl Work Environment is a
requirement in attracting, retaining and
engaging our high performing Nestl talents.
This depends on the level of trust each
employee has in Nestl and our ability to truly
live our values and principles.
Nestl, within the cultural-social context
of each Market, aims to promote a healthy and
positive lifestyle at work and outside of work,
and is thereby committed to providing:
A positive and inspiring work-life environment
which supports a good balance between work
and personal life.
Opportunities to participate and contribute in
volunteer programmes, where appropriate,
that leverage the Creating Shared Value (CSV)
principles that are important to us.
Work-life exibility whenever possible in order
to provide a framework in which specic
7. Work-Life Environment
It is the responsibility of each manager to propose
within the framework of the Company policy,
the remuneration of their employees. They will
also communicate the salary policy, decisions
and the individual remuneration to each staff
member, taking into account their performance
and specic responsibilities.
The necessary time should be spent with
each employee to explain his or her specic
situation in terms of remuneration and benets,
if needed with the support of HR management,
in order to communicate properly, clearly and
with sufcient transparency.
Corporate Compensation & Benets (C&B)
will provide the necessary support and guidance
so that the NiM C&B are able to ensure all pay
and benet programmes are implemented and
communicated coherently and consistently
across the Market and Businesses. As a result,
all employees will have a clear understanding of
the programmes in which they participate.
8. Employee Communication
8 Nestl Total Rewards Policy
The way in which a remuneration policy is set
up reects a companys corporate governance,
i.e. how the company is run, how it ensures
Compliance and how it assumes its responsibility
by Creating Shared Value for employees
and society.
In addition, all the pay and benet programmes
which are part of this policy must be in full
compliance with applicable local, national and/
or international laws and regulations, as well as
Nestls internal regulations.
Remuneration levels should properly reect
the skills and the efforts of an employee. Nestl
gives equal consideration to all employees,
regardless of the level of their remuneration and
without any discrimination with respect to, but
not limited to, origin, nationality, religion, race,
gender, age or sexual orientation, as stated in the
Nestl Corporate Business Principles.
Nestl understands the importance of
transparency towards its shareholders and
the public. Such transparency goes along
with the disclosure of pertinent information.
Due consideration must also be given to the
protection of the employees privacy.
Corporate Human Resources is available
for advice and active support in connection
with the design, review and implementation
of all elements of this policy.
9. Corporate Governance, Compliance
and Creating Shared Value