Sustainability report 2009
Benefits and incentives
To retain our market leadership and deliver superior financial results and customer service we need to recruit and retain the best talent available in both leadership and technical expertise.
Attracting and retaining talented individuals is possible by the creation of a climate in which people engage in the success of the Company and also by the Company being seen to reward and recognise employees in a competitive labour market.
Our businesses have freedom to develop their own remuneration strategies that enables them to compete in their own markets. This is important as we operate in a variety of market sectors and geographies. We also recognise that attracting talent from outside our traditional markets is important to bringing diverse talents and experiences into the Group. Our businesses conduct annual performance reviews and use the outcomes directly or indirectly to reward employees in the annual salary review. We maintain vigilance in all aspects of our remuneration strategy through external benchmarking.
Flexible benefits are available in most of our UK businesses and all UK employees are eligible to join the Company share save scheme shortly after commencement of employment or joining Balfour Beatty as a result of an acquisition. In 2009, 18% of eligible employees took up an option comprising nearly 6000 employees. They were granted over 2.5 million share options. This further improves employee ownership in our Company. The Company believes that offering a SAYE scheme forms an important part of aligning our employees’ interests with those of our shareholders and we plan to offer SAYE again in 2010.
Each of our businesses is able to develop its own strategies to recognise achievements and performance. Each year we recognise the achievements of our graduates by the Chairman’s prize for innovation which all the graduate population are eligible to enter. Graduates on the shortlist then present to senior executives with the winner being presented with a prize of £1,500 and being asked to present at the annual graduate conference.
Pensions
We run several pension schemes. The main Balfour Beatty pension fund in the UK has around 18,670 pensioners, 15,640 deferred members and around 11,600 active members. The Mansell and Hall and Tawse funds were integrated with the main fund in 2009.
Our defined benefit scheme was mostly closed to new members in 2003. Like most schemes our defined benefits scheme has been adversely affected by the economic climate and the impact of pensioners taking their pension longer as a result of improved longevity.
Recently we embarked on a series of liability mitigation measures such as limiting increases in pensionable pay for active members and offering enhanced transfer values to deferred members. The Company also increased its contributions to the scheme.
Other pension funds include membership of the Railways Pension Scheme, Exeter Airport and Cowlin. With the acquisition of Parsons Brinckerhoff we inherited a closed defined benefit scheme with 4,300 members and an open defined contribution scheme with 1,800 members.
The board of trustees of the main fund is chaired by Alistair Wivell, a retired main board director of Balfour Beatty plc with over 40 years’ service in the Company. The Board includes a balance of nominated employee and employer members and a pensioner elected trustee. The trustees meet at least quarterly. They are advised by Towers Watson for actuarial purposes and legally by Pinsent Mason.
The pensioners are helped by over 60 pensioner representatives called shepherds who act as focal points for pensioner questions and concerns. Each year the shepherds meet to get updates from the Company and pensions centre and trustees. They also look out for personal assistance or welfare needs among the pensioner population.
In 2009, we introduced salary sacrifice for pensions under the brand “Smart Pensions”. This enables employees to sacrifice an aspect of their salary equivalent to the members’ pensions contribution leading to NI savings for both the employee and the Company.
In 2009 we launched a new brand for pensions under the strap line “Simply Pensions”. This brand covers communications including members newsletters, funding updates, members booklets and benefits statements.
The remuneration for Executive Directors and other senior managers is overseen by the Remuneration Committee which comprises five non-executive Directors under the chairmanship of Robert Walvis. The Remuneration Committee reports to shareholders at the Annual General Meeting and is responsible for setting levels of remuneration that facilitates the recruitment and retention of senior managers.
Typically at this level the remuneration package would include a base salary, annual bonus, share-based incentives and the usual company benefits. The remuneration committee aim to set salaries at around mid-market levels and they are reviewed annually.
Share-based incentivisation is aimed at creating alignment with the interests of shareholders by having performance compared to the share performance in a set of similar companies. In addition there is a requirement for Executive Directors and other senior managers to build up and retain a determined level of share ownership. The Remuneration Committee specifically considers the issue of not encouraging excessive risk and does this by capping any bonus, and setting targets and reward at appropriate levels. A proportion of the annual bonus is deferred as shares for three years.