Existing Labor Remuneration System and Motivation Programs

Financial and non-financial incentives for personnel of the Company’s SDCs in 2012 were provided under the existing collective bargaining agreements, pay regulations, and other local documents governing the procedure for social benefits and guarantees for employees.

In accordance with the existing regulations, the labor remuneration system applicable to SDCs’ employees includes:

• base component:
  • a salary component, which is the base value for setting the remuneration level at wage rates (official salaries) in accordance with the Uniform Wage Scale and the List of Positions (Jobs) Distributed Among Labor Remuneration Stages, subject to indexation in accordance with the collective bargaining agreements of SDCs and their branches
• additional incentive pay, benefits, and bonuses:
  • additional incentive pay and benefits for a working environment other than normal conditions and for special working conditions (roving work, multi-shift work, night work, etc.)
  • bonuses for attaining collective performance indicators and for individual results
  • longevity pay (remuneration for the length of continuous service in the electricity industry)
  • remuneration for the year’s financial results.

The composition of the employee’s benefit package in 2012 was in accordance with the list of benefits, remuneration, and guarantees defined in the Sectoral Wage Rate Agreement (SWRA) in the Russian electricity sector for 2009–2011, subject to the terms and conditions of the agreement to amend and supplement the SWRA and extend its term for 2012.

Employees of SDCs received the following social pay in 2012:

• vacation pay
• bonuses in connection with anniversaries and received official and corporate awards
• partial remuneration for electricity and heating expenses
• benefit payments for employees in exceptional circumstances
• additional remuneration for business travel expenses, compensation for mobile communication expenses and recreational activity expenses (including sports and cultural events) and other benefits raising the living standards of the Company’s personnel.

The year 2012 witnessed changes in the system of key performance indicators for the directors general and senior managers of SDCs. The new KPI system was developed to implement the instructions issued by the Russian President and the Russian Government as part of the Company’s development strategy for the period until 2015 and is aimed at strengthening control of SDCs’ operations and increasing the motivation of employees.

In order to increase the interest of SDCs’ employees in achieving the strategic goals of the Company, the following measures in personnel motivation were taken in 2012:

• targeted increases in pay for key positions and occupations
• additional pay and increased bonuses for production personnel according to the results of evaluation and qualifying examinations
• updating of the programs to provide corporate support for SDCs’ employees in relation to improving their housing conditions as related to widening the range of program participants and corporate support types
• expansion of the list of social benefits and increases in social benefits
• official awards for occupational achievements and corporate awards for high professionalism and honorable and effective work.