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Compensation Management of

UNILIVER

NINJA | Compensation Management | 09-01-2017


Introduction

‘Fair Compensation’ means ensuring the pay for employees is set at a level that is both fair and
livable, and provides equal pay for equal work. A Framework for Fair Compensation covers the
overall compensation process (although it does not in itself form part of any contract with
employees). It provides a structured way for a company to outline how the various elements of its
compensation packages deliver fair compensation to its employees.

The Unilever Framework for Fair Compensation

Our Framework for Fair Compensation covers our own direct employees. We also look to extend
the concept to the numerous organisations that supply Unilever with materials, services or
contingent labour through our Responsible Sourcing Policy.

Our Framework applies globally and has a number of over-arching principles, detailed below. We
base these on our existing Unilever fundamental reward principles and policies (Appendix 1), our
commitments to Diversity and Inclusion, and to Free and Fair Representation, and we now explicitly
include a Liveable Wage commitment. We have also referenced the work of the Fair Wage Network
(Appendix 2) in developing our Framework. The application of our Framework is through the
various compensation policies and procedures applicable in each country in which we have
employees. Our intent is to achieve full global compliance with our Framework principles by 2020
(or sooner) and we are establishing an internal process to monitor progress. The following pages
explain our monitoring process.

Over-arching
Principle Fair Compensation delivery
Lowest grades of full-time employees in any country will receive at
Fair and Liveable least fixed compensation
(fixed cash amounts and fixed non-cash benefits) sufficient for their
compensation needs and provide some
discretionary income (using a Living Wage comparison).
Fixed compensation amounts will be achievable without need to work
excessive hours (eg
overtime), or rely on any non-guaranteed compensation (eg bonus).
Part-time employee compensation based on the full-time fixed
compensation pro-rated for
hours worked.
Compensation will be market-based and fairly reflect an employee’s
Market-based skill, education and
compensation experience.
Fixed compensation amounts meet or exceed any legal minimum
standards or appropriate
prevailing industry standards.
There will be a regular review of the compensation amounts.
Equal compensation for equal work with no discrimination on the
No Discrimination in grounds of race, age, role,
gender, colour, religion, country of origin, sexual orientation, marital
compensation status, dependants,
disability, social class or political views.
Employees benefit from the improved performance of their local
Performance Focus Unilever business through
compensation
providing participation in appropriate business performance-linked bonus plans.
alignment to our Employees (where possible) will have the opportunity to take a
business financial interest in Unilever
through acquiring shares.
Open and Employees have sufficient information to understand how their
Explainable compensation package is
calculated, what amounts to expect and how they will receive these
compensation amounts.
Where our employees have chosen to be represented by Trade Unions,
then we will look to
use collective bargaining as the primary mechanism for pay reviews to
the extent
appropriate. Where employees have chosen not to be represented then
other appropriate
mechanisms will be used.
Answers always provided to any employee compensation queries.
Employees receive their compensation regularly, in full and on time.
December 2015

Identifying Liveable Wage amounts

Our over-arching principle to provide Fair and Liveable Wages requires us to be aware of what is a
credible Living Wage amount for each country in which we have employees. In some countries,
however, there are different Living Wage amounts quoted by different organisations and often
based on different criteria. To overcome the issue of deciding what is the most appropriate amount
to use, Unilever has contracted the Fair Wage Network, an independent recognised authority on
fair and living wages, to provide a global solution. The Fair Wage Networkhas developed a global
database containing all known Living Wage amounts for each country, along with summary details
of the calculation basis for each Living Wage. To recognise there may be different dates when
some country Living Wage amounts were developed, or that the amounts are based on different
family unit sizes, etc, theFair Wage Network (without losing the core essence of the original
Living Wage methodology) normalised these varying amounts using sophisticated calculations to:

a. A common date (updated each year reflecting inflation since the original amount was
developed).

b. A standard family unit size (2 adults + 2 dependants).

c. The local currency (if the original amount was quoted such as US Dollars or Euros).

Then, based on these normalised amounts, the Fair Wage Network has developed a mean Living
Wage amount for each country. Where any country region or city-level Living Wage amount is
available, this data is also included in its database. The Fair Wage Network will update its database
at least annually to reflect any changes to Living Wage levels for each country. Approved Unilever
managers will be able to access the

Fair Wage Network’s database through a secure online portal to identify the Living Wage amount
(or mean amount) for their countries.

Unilever ‘Fixed Compensation’ Amounts for comparison against Living Wages

The Fair Wage Network has guided us that for fair and liveable wage comparison purposes we
should compare the fixed compensation amount of our lowest grade of employee in a country to
the Living Wage amount in its online database. This fixed compensation amount would typically
include:

i. The employee’s contractual full time fixed cash pay.

ii. Any fixed additional cash allowances.

iii. The cash equivalent value of any fixed benefits provided (eg medical, food,
accommodation, transport, etc).
Item iii reflects that most Living Wage methodologies assume employees have to fund medical
care, accommodation, food etc themselves, therefore if Unilever provides these as benefits it is
fair to include a cash equivalent value in the fixed compensation amount.

Overtime and bonus amounts are not included in any fixed compensation comparisons as these are
neither fixed nor guaranteed. Long-term benefits, such as pensions, are not a source of current
liveable income so the cash equivalent value of these is also not included in fixed compensation.
December 2015

Internal compliance monitoring of the Unilever Fair Compensation Framework

The Global Reward function (part of Global HR) is establishing a Fair Compensation Framework
Register of all countries in which Unilever has employees. This will record the status of each
country’s compliance with the Framework. From 2016 onwards, on an annual basis, the HR Vice-
President responsible for each country will be required to certify to Global Reward that:

1. The fixed compensation elements for employees are developed and then regularly
reviewed in accordance with company reward principles and policies.

2. The sum of fixed compensation elements for the lowest grades of full-time employees
in the country:
a. Is at or above any legal minimum standards or appropriate prevailing industry
standards.
b. At least equals the Living Wage amount (or mean amount) for the country available
from the Fair Wage Network database.

3. The fixed compensation elements do not discriminate between employees due to their
race, age, role, gender, colour, religion, country of origin, sexual orientation, marital
status, dependants, disability, social class or political views.

4. The fixed compensation amount for the lowest grades of full-time employees is achievable
without the need to work an excessive number of hours.
a. The contractual basic working hours for an employee would not exceed the country
legal standards.
b. Any additional (overtime) hours worked are on a voluntary basis, and are
compensated at premium rates.

5. The payroll process in the country delivers the employee’s full pay correctly and on time.

Country Reward teams will support the HR Vice-President in preparing for their compliance
certification submission.
December 2015

Appendix 1

Unilever Reward Principles, Policies and Procedures

Our fundamental Reward Principles are that:


Fixed pay is Market-based, Fair and Competitive.
Variable pay is used to drive improved Performance for both employee and business.
Exceptional individual employee contributions are appropriately Recognised.
Employees have the opportunity to take a financial interest in Unilever through acquiring
shares, providing perspective, belonging and Alignment.
All elements of reward will be Open, Fair, Consistent and Explainable.

We translate these Principles into the reward policies, procedures and systems. The detail of
these will vary by country. The annual compliance certification process will ensure each
country complies with both the wording and the spirit of our Fair Compensation Framework:

A. Fixed Pay policies and procedures that:


a. Group ‘equivalent value’ jobs to the company fairly into appropriate grades/work levels.
b. Use objective analysis of independent surveys to identify the ‘pay market’ rate for such jobs
including where relevant any fixed levels of allowances.
c. Set, or negotiate as appropriate, the pay rate and any relevant allowances for our employees
in such grades to broadly match the median ‘pay market’ rate for similar types of jobs.
d. Establish a fair and objective ‘skill and performance’ based process for an employee’s pay
progression from any entry pay level in a grade to the pay rate, or even above the pay rate.
e. Do not discriminate between employees due to gender, age, ethnicity, etc.
f. Ensure that the lowest graded full-time employees receive fixed pay that complies both with
any relevant government or industry standard minimum wages and with any known credible
Living Wage amounts.

B. Payroll procedures and systems which ensure that:


a. The amount of fixed pay, allowances and any earned additional hours’ pay is paid in full,
on time and in the manner agreed with employees or their representatives.
b. The amount payable has no deductions other than those legally required for employee
tax and social security, or otherwise contracted with the employee (eg for any
contribution to the provision of a benefit such as pension or healthcare or similar).

C. Variable Pay (bonus) policies and procedures that:


a. Motivate employees to improve both their own and the company’s performance
through an opportunity to earn additional variable pay through an appropriate bonus
plan.
b. The bonus is linked to a number of key business performance measures applicable at the
location where the employee works.
c. The bonus plan provides employees with a direct line of sight to the business results they
can impact by their own and, with their colleagues, their collective team performance.

D. Recognition policies and procedures that:


a. Are additional to the Fixed and Variable pay and acknowledge exceptional individual
employee contributions to the business beyond the expectations of his or her normal
work duties.
b. Use a fair and consistent assessment process to identify such exceptional contributions.
c. Provide a range of recognition options depending on the significance of the contribution to
the business varying from a simple thank you, or gift vouchers to one-off bonus amounts.

E. Share ownership policies and procedures that encourage employees to own an equity stake in
Unilever through voluntary participation in a Unilever Shares programme.
F. Benefits policies and procedures that:
a. Where appropriate provide appropriate medical, healthcare and other similar facilities at
costs cheaper than employees can purchase individually.
b. Provide retirement saving plans to allow employees to prepare for their long-term future.

G. Compensation communication arrangements that:


a. Provide employees with ready access to all the relevant information about their total
employment package, delivered through either formal employment contracts or union
agreements (Social Dialogue) or employment policy manuals and accessible policy
websites.
b. Provide the information in employees’ own language to ensure they are aware not only of
their fixed pay amount but also their total compensation package.
c. Provide employees with the opportunity to raise queries and have these suitably answered.
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Appendix 2

The Fair Wage Network

These are the Fair Wage Network’s concepts that we used in the development of our Framework.

Fair Wage Definition

“Wage levels and wage-fixing mechanisms that provide a living wage floor for workers, while complying
with national wage regulations (such as minimum wage, payment of wages, overtime payments,
provision of paid holidays and social insurance payments), ensure proper wage adjustments and lead to
balanced wage developments in the company (with regard to wage disparity, skills, individual and
collective performance and adequate internal communication and collective bargaining on wage
issues).”

Wage Dimensions

1. Payment of wages A wage that is regularly and formally paid in full to the workers.

2. Living wage A wage that ensures minimum acceptable living standards.

3. Minimum wage A wage that respects the minimum wage regulations.

A wage that is comparable to wages in similar enterprises in the same


4. Prevailing wage sector.
Payment of working A wage that does not generate excessive working hours and properly
5. hours rewards normal
working hours and overtime.

A wage that leads to a balanced wage structure/composition between


6. Pay systems the basic wage and
additional bonuses and benefits.
A wage that reflects different levels of education, skills and professional
experience, as well
as rewarding individual and collective performance.
A wage that complies with regulations on social insurance payments
and paid holidays and is
not dominated by disciplinary wage sanctions.

Communication and A wage on which workers receive sufficient information in advance


7. social (through an individual
work contract), in the course of the production process (through
dialogue regular communication
channels) and at the time of the wage payment (with a detailed pay
slip).
A wage that is negotiated individually (with individual employers) and
collectively – notably
through collective bargaining – between the employer and the
workers’ representatives who
are freely accepted in the company.

Wage discrimination A system of equal wages for equal work that does not lead to wage
8. and discrimination and does
not generate unjustified, too high and too rapidly growing wage
wage disparity differentials within the
company.

9. Real wages A wage that progresses at least in proportion to price increases.

A wage that progresses proportionally along with enterprise sales and


10. Wage share profit growth and

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which does not lead to a fall in the wage share in enterprise performance
growth.

11 A wage whose progression does not lead to a dramatic reduction in


. Wage costs wage costs within total
production costs and as a percentage of employment.

A wage that progresses along with changes in intensity at work,


12. Work intensity, technological contents and
technology and up-
skilling the evolving skills and tasks of the labour force.

Fair compensation:
Finding great candidates to fill executive positions is inherently difficult. Though quality
candidates can be found, companies tend to lose their top pick because they can’t meet a
candidate’s compensation expectations.

A skilled, motivated and engaged workforce is essential to achieve the growth ambition.
Fair compensation is an important factor in achieving this.

 Lowest grades of full-time employees in any country will receive at least fixed
compensation (fixed cash amounts and non-cash benefits) sufficient for their needs
and provide some discretionary income.
 Fixed compensation amounts will be achievable without need to work excessive
hours (eg. Overtime), or rely on any non-guaranteed compensation (eg. Bonus).
 Part-time employee compensation based on the full-time fixed compensation pro-
rated for hours worked.

Unilever’s Framework for Fair Compensation:

As part of the Unilever Sustainable Living Plan (USLP), in 2014 they set themselves the
target of creating a structured way to define and assess how the elements of their
compensation packages deliver fair compensation for their employees. The result was their
Framework for Fair Compensation, which was finalised in 2015 and rolled out across our
business in 2016. Targets & performances are-

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Five principles underpin their Framework:

1. Fair and liveable compensation


2. Market-based compensation
3. No discrimination in compensation
4. Performance-focused compensation providing alignment to our
business
5. Open and explainable compensation.

Their ambition is to achieve full compliance with these principles by 2020 – by all their
businesses across the world – and they have established internal progress monitoring
systems to help them reach there.

For each principle, their Framework outlines how they should deliver fair compensation
by listing a number of standards. They require each country business to report its status
against the standards of their Framework each year, and where appropriate, country reports
must include a remediation plan to rectify any issues of concern.

Peter Newhouse, our Executive Vice President for Global Reward, HR, explains: "Our
Framework for Fair Compensation has helped us set a course for achieving a living wage
for all direct employees on our lowest pay grades by 2020."

A Living Wage for all employees:


At the heart of their Framework is the principle of a 'living wage' - that is, one that gives
their employees enough to "provide for their family's basic needs, for food, housing,
education and healthcare as well as some discretionary income ". While what they pay
employees in any country is generally based on that country's ‘market’ for similar jobs -
that is, by objective analysis of independent pay market surveys - applying the living wage
principle means that their lowest-paid employees should always receive pay that is fair and
live-able.

They have worked closely with the Fair Wage Network (FWN), an independent NGO
which works to promote better wage practices through working with businesses, NGOs,
worker representatives and researchers. FWN have helped them develop their
understanding of Living Wages, how many of its existing compensation arrangements
deliver fair wages, and how it fit in to their overall Framework for Fair Compensation.

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Unilever started in 2014 by asking them to review how their wage levels for entry-level
employees at their factory sites in 38 countries compared to living wage thresholds in those
countries.

Following this, since 2015, FWN have provided them with access to their global Living
Wage database. This gives them an objective external source of the living wage amount
for each of the countries (108) where they have employees. They are using this database to
assess whether the current fixed compensation paid to all their lowest pay grade full-time
employees (including factory and non-factory employees) in each country is meeting their
living wage standard.

No discrimination
They have a longstanding commitment to equal pay for equal work, which forms another
principle of their Framework. Their compensation structures are intended to be gender
neutral, with any pay differences between employees in similar jobs fairly reflecting levels
of individual performance and skill.

However, if analysis indicates any average pay differences between genders at a country
or grade level (a ‘gender pay gap’), they will support and identify opportunities to address
gaps via their diversity and inclusion initiatives. This will help them achieve their ambition
for their Framework for Fair Compensation to support full equal opportunities for all.

Equal pay for women:

They believe that reducing the average pay gap across society between men and women is
a crucial part of fair compensation. On 26 August 2016 (Women’s Equality Day), they
joined 29 companies in signing the White House Equal Pay Pledge. For their US business,
this pledge means they will conduct an annual gender pay analysis, review hiring and
promotion processes and procedures to reduce unconscious bias and structural barriers, and
embed equal pay.

In the UK, they actively support the government’s new Gender Pay Gap reporting
requirements.

These measures reaffirm their commitment to the advancement of women’s economic


inclusion as a business priority.

Reward at Unilever

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Unilever is building a winning culture, in which every employee is encouraged to grow to
his or her full potential. They have developed a performance-based reward structure that
recognizes people have delivered results and have the right values for our business.

Their goal is to deliver Unilever's promise to consumers and the world through a pioneering
employment experience that their competitors wish they had.

That means they don't just encourage employees to give them feedback, they have
developed leading-edge tools to help them hear clearly how reward feels from the point of
view of their people.

Total reward statement

They aim to give every employee access to a Total Reward Statement in real time. This
describes and values every element of the reward package. It also provides useful
information on how the elements of each individual’s package work.

Unilever will stretch the content and coverage of Total Reward Statements to more than
just money; they want employees to be able to see the value of all their benefits at Unilever,
including learning to help individuals keep track of their progress and potential.

Total Reward Statements already cover all their management staff across 96 countries.
They are rapidly adding more and more people to the coverage and they won't be satisfied
until they ha've included every single person in Unilever.

Reward development plan

Unilever have created a longer-term Reward Development Plan for each country so that
they can continuously improve the relevance and effectiveness of the rewards they offer to
their people.

They know that reward is important. Reward should not be a 'black box'. They believe that
rewards should be 'open, fair, consistent and explainable' and they aim to deliver every
aspect of this in everything they do.

Incentives
They also offer employees attractive incentives. If the company does well in meeting its
goals, their total pay should be around the top quarter of the market. That means that pay
for highly rated people making an exceptional contribution will be towards the top of the
market range. If they all work together to deliver excellent results for Unilever, they will
be well rewarded.

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Figure: Average profit Sharing by Unilever

How much does Unilever pay?


Unilever pays its employees an average of Rs. 78,223 a year. Salaries at Unilever range
from an average of Rs. 57,359 to Rs. 122,493 a year. Unilever employees with the job title
Healthcare Consultant make the most with an average annual salary of Rs. 400,000, while
employees with the title Assembly Line Worker, Factory make the least with an average
annual salary of Rs. 38,500.

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Figure: Yearly paid salary by Unilever

Figure: Unilever’s hourly payment rate

How much does Unilever pay in bonuses?

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Unilever pays an average of $6,769 in annual employee bonuses. Bonus pay at Unilever
ranges from $750 to $314,000 annually among employees who report receiving a bonus.
Employees with the title Vice President (VP), Marketing earn the highest bonuses with an
average annual bonus of $314,000. Employees with the title Quality Assurance (QA)
Technician earn the lowest bonuses with an average annual bonus of $750.

Figure: Bonus payment at Unilever.

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