Remuneration system

Nornickel's remuneration policy aims to:

• attract and retain employees;
• promote higher labour productivity;
• ensure administrative efficiency and streamlining;
• enforce compliance with legal requirements.

The remuneration package consists of the fixed and variable components (70% and 30%, respectively) paid based on the Company's operating performance and achievement of relevant KPIs.

The underlying principles of the remuneration policy include:

• internal equity – remuneration management based on HAY Group job description and evaluation methodology;
• external competitiveness – remuneration level determined based on the labour market data, with adjustments made for the company's focus area, business location and job grades;
• performance-based incentives – changes in the pay level subject to the annual performance assessment outcome;
• simplicity of the remuneration system – pay level calculation and review procedures are clear for every employee.

In addition to salaries, the Company’s employees enjoy a variety of benefits. Reimbursements of vacation travel expenses (round trip travel expenses and baggage fees) for employees living in the Far North and their families, and provision of discounted tours for health resort treatment account for 69% of total employee benefits.

Currency	2015	2016	2017
USD based on the average annual USD/RUB exchange rates of 58.3529 in 2017, 67.0349 in 2016 and 60.9579 in 2015.	1,393	1,405	1,784
RUB ’000	84.9	94.2	104.1

Indicators	2015	2016	2017
Total expenses on employee benefits across the Group's Russian operations	102,000	103,000	122,539
including the amount spent per employee	1,300	1,300	1,571

Efficiency improvement programmes

The Company implemented its employee performance management system back in 2014, with assessment relying on a variety of key performance indicators (KPIs), including occupational safety, operating efficiency and capital management. In 2017, some 4,326 people (employees of the Company’s Head Office, branches and subsidiaries) took part in the KPI-based assessment. The new system helped develop uniform criteria for the evaluation of employee performance enabling the management and employees to align the current year's priorities with performance indicators of the Company/branches/subsidiaries and join their forces to find a path for delivering on the tasks in hand. Moreover, this system makes it possible to link an employee's performance to his/her pay level.

In 2018, we will continue the roll-out with a focus on SAP HCM-based performance assessment automation across the Company's operations. In 2017, the automated SAP Human Capital Management system was implemented at Medvezhy Ruchey, Nornickel – Shared Services Centre, NORMETIMPEX and Bystrinsky Transport Division of MMC Norilsk Nickel. On top of that, 2017 saw the roll-out of the Talent Pool and Performance Assessment automated management subsystems at Polar Division, Kola MMC, Pechengastroy and GRK Bystrinskoye. The performance assessment results are also used to nominate employees for awards.