Compensation Program Guide

Transcription

1 Compensation Program Guide For Toronto Hydro Corporation (THC) and Toronto Hydro Electric System Limited (THESL) Executives, Managers, Supervisors & Professionals February 2009 February,

2 Your Guide to Compensation at Toronto Hydro What s Inside Your Guide to Compensation at Toronto Hydro... 2 Compensation Program Details Scorecards... 5 Weightings by Position... 5 The Management Process... 7 Measurement & Relative Determination... 8 Individual Variable Pay and Your Opportunity Appendix At Toronto Hydro Corporation, we are committed to the safety of our employees, prudent operation and investment in our infrastructure, promoting conservation, growing our affiliate businesses, providing cost effective reliable services to our customers, and working in a productive collaborative way towards the achievement of our vision and goals. We understand that an essential part of our ability to meet these commitments is the dedication and talent of our employees. We also recognize that we need to remain competitive in our ability to attract, motivate, and retain the people critical to our organization s success. One way to do this is to continue to evolve our rewards strategy into a strong, customer focused performance-based program. This guide provides information on our Compensation Program, including: Our compensation philosophy and principles Base and variable performance pay details Sample base pay and performance pay opportunities Glossary of Terms February,

3 Our Compensation Philosophy and Principles We recognize that to ensure market competitiveness and a cohesive, wellperforming workforce, our compensation system must recognize both superior business achievements and behaviours. For these reasons, we have made significant improvements to our compensation system. Our performance-based compensation philosophy ensures that our rewards are appropriately aligned with our strategic direction, vision, goals, and behaviours. It also ensures a system by which both you and the organization can thrive. With a collaborative, resultsfocused approach, we can achieve market success. The following principles shape our Compensation Program: Motivating employees by rewarding both the results and the behaviours required to achieve business goals Recognizing productive employees assist with cost containment and improving service to customers Providing competitive total compensation Ensuring that compensation opportunities are fair and equitable Aligning compensation with both individual and business success Compensation Program Details There are two components to our Compensation Program base pay and variable performance pay. This represents your total direct pay opportunity at Toronto Hydro. Current Base Pay Variable Pay + + Individual Corporate/Affiliate and Individual = = Annual Base Pay Increase Pay Award Total Compensation February,

4 Base Pay Base pay is the foundation of the total direct compensation opportunity under the Compensation Program. In accordance with our Compensation Philosophy and Principles, we provide market competitive base salaries to help us attract, motivate, and retain employees who are critical to our success. Each salary range has a minimum, job rate, and maximum that is market competitive. The job rate is a fully competitive level of compensation and should be achieveable over time for solid performance. Your pay within the salary range and your performance are linked. Employees who are fully meeting the expectations of their job should expect to be paid at or around the job rate. Employees who are still learning or are not yet fully meeting the job expectations should expect to be paid below the job rate, and employees who exceed expectations may earn compensation above the job rate. Your progression within the range will depend on your performance and your current level of pay. Over time, your pay will progress to a level within the range that reflects your performance. Each year, the job rate will be reviewed to ensure that it continues to be competitive and will be adjusted as required. Variable Pay All Toronto Hydro Executives, Managers Supervisors and Professionals of the Corporation (THC) and the Affiliates are eligible for variable performance pay. The objectives of performance pay are to: ensure that total direct compensation opportunities (base and variable performance pay) are fully competitive provide employees with total direct compensation that recognizes results achieved and behaviours demonstrated during the previous fiscal year ensure that all variable performance pay awards are fair and equitable relative to the contributions of others ensure that the overall variable pay opportunity recognizes the results of the Corporate/Affiliate performance February,

5 Annual Process November/ December Set variable performance pay award percentage for next fiscal year. Complete current year key performance indicators (KPIs) audit and review. January Set individual performance contracts for current year. Send estimates of performance contract results to Organizational Effectiveness (OE) for preparation of performance evaluation and payouts. Set Corporate/Affiliate threshold, target, and maximum goals for current year. February Senior Executives evaluate individual performance and review performance ratings regarding previous year s performance to ensure cross business unit consistency. Confirm individual performance ratings. Senior Executives also assess individual performance from previous years. Organizational Effectiveness (OE) calculates base pay increases and performance pay allocations. March THC CEO advises Compensation Committee and the Board of Directors of overall results. Leaders share performance rating with employee. Payroll is advised of base pay increases and performance payouts. July Leaders complete mid-year discussions with employees to review individual performance, including opportunities for development and career goals Scorecards is measured against a scorecard of key performance indicators (KPIs) in each of four categories People, Finance, Operations, and Customer. The KPIs provide important organizational measures and targets that will focus performance discussions between leaders and employees. Refer to the appendix to this guide for 2009 scorecards for THC and THESL. Weightings by Position Corporate/Affiliate and individual performance goals are weighted by position. Weightings refer to the percentage of the total direct pay award that will be paid based on performance against the goals for the position. Position weightings vary by role to reflect the performance focus of your role and may change from year to year. February,

6 2009 Weightings Position Individual (%) Affiliate (%) Corporate (%) CEO THC President THESL COO, Controller, Executives THESL Executives CFO, VP Org Effectiveness & EHS THC/THESL 40 THESL Executives THC Managers THC Managers THESL Supervisors and Professionals THC Supervisors and Professionals THESL Service and Administration THC Service and Administration THESL Note: If you are a THC/THESL Professional dedicated to supporting the unregulated businesses, the recommended split would be 80% individual performance, and 20% THESI performance February,

7 The Management Process A single rating of performance is used for the two components of our Compensation Program base pay and variable performance pay. The following five-point performance decision framework facilitates the comparison of performance relative to others in similar jobs with similar responsibility, expertise, and knowledge. Rating Overall Exceeds all result expectations and is a role model for core behaviours these individuals are in the top 5% of performers Exceeds some and meets all result expectations and demonstrates core behaviours at or above solid level Generally achieves expected results and demonstrated core behaviours fully meets expectations. Most employees should perform at this level Falls short on some results and/or demonstration of core behaviours but is making steady progress towards achievement this level of performance is fully acceptable for employees new to role Not acceptable results achievement and/or behaviour Internal Consistency and Equity Each year, individual performance will be assessed relative to the expectations of the job. The process map on the next page highlights the key steps in this process. It is designed to ensure that performance ratings are fair and equitable relative to the results achieved, your demonstrated behaviours, and other contributions. and overall contributions will be reviewed within and across business units to ensure fairness and consistency. February,

8 Process Overview Target Setting Scorecard/KPIs, individual performance contracts set Measurement Results against target assessed Relative Determined Executives discuss relative individual performance by business unit Preliminary performance ratings established Cross Organization Consistency Senior Executives review preliminary ratings for cross organization consistency Final Rating Confirmed Final performance ratings confirmed by CEO Measurement & Relative Determination Following the objective setting meetings that occur by January 31 st, leaders and employees are required to meet mid-year by the end of July to review progress towards the achievement of their individual objectives. At year-end, the appraisal discussion in January will include feedback on the achievement of performance objectives, knowledge, skills, and competencies related to day-to-day performance, as well as demonstration of corporate behaviours. This feedback helps to determine a single rating for individual performance, which is then used to calculate base and performance pay at year-end. Base Pay Your base pay may grow through different types of increases: Annual Increase this type of increase is based on your individual performance relative to your current pay within the salary range. An increase, if any, is normally paid in March (or 1 st week of April with retropay to January). Job Change Increase this type of increase recognizes movement to a new job in a higher salary band. A job change represents a significant increase in job responsibilities, required skills, experience, and knowledge. It will likely result in a pay increase, but not always. An increase, if any, is given at the time of expanded accountability. February,

9 Variable Pay Your performance pay award is based on a combination of Corporate/Affiliate results and your individual performance rating. Your performance pay award will be based on your individual performance evaluation and business results (Corporate/Affiliate). The weighting of individual and business results will vary by role. The size of your performance pay award opportunity will depend on your base salary and target performance pay percentage. The final payout will depend on the weighted achievement of the Corporate/Affiliate scorecard and your individual performance evaluation. Final awards may be above or below the target pay percentage. Actual payouts will vary with the level of performance achieved as follows: Corporate Threshold 1 = 25% of weighted target award Target 2 = 100% of weighted target award Maximum 3 = 150% of weighted target award Threshold refers to the minimally acceptable level of performance necessary to earn an incentive award. Target refers to the expected level of performance. Maximum refers to the demonstration of superior performance that exceeds expectations. Example We have provided an example below to illustrate how this works: Employee Salary = $90,000 Target Bonus Percentage = 8% or $7,200 % Weighting = 80% Individual, 20% THESL February,

10 Individual Variable Pay and Your Opportunity Outstanding 5 = 135% to 150% of eligibility Exceeds 4 = 110% to 130% of eligibility Solid 3 = 90% to 105% of eligibility Developing 2 = 50% to 80% of eligibility Not Acceptable 1 = 0% of eligibility Example If THESL met 95% of the scorecard and the employee was a solid performer (3 performance rating) the payout would be calculated as follows: Affiliate $7,200 x 20% (weight) x 95% = $1,368 Individual $7,200 x 80% (weight) x (90%-105%) = $5,184 - $6,048 Final Average Payout = $6,552 - $7,416 Percentage of Target = 91% - 103% The final individual payout will be determined by the Executive/Manager based on the employee s relative performance within the range set for each performance rating. This discretion is intended to ensure that the level of stretch in targets, the degree of achievement, and other contributions impacting performance are considered in the determination of the final award payout. February,

11 Appendix 2009 THC and THESL Scorecards Following are the THC and THESL Scorecards. The KPI's provide important organizational measures and targets that will focus our performance discussions. The scorecards will be the framework used to report overall performance under the categories of People, Finance, Operations, and Customer. THC 2009 Scorecard KPIs Weight Threshold Target Maximum People Safety - My Goal is Zero (%) 5% 93% 94% 95% Safety Leadership (%) 5% 70% 80% 90% Attendance - avg. # days absent (#) 5% Finance Consolidated Operating Expense ($M) 20% $220.3 $215.3 $ Consolidated Net Income ($M) 20% $47.1 $52.1 $57.1 Operations Distribution Plant Capital Per Unit ($K) 30% $1.05 $0.975 $0.90 Customer SAIDI (Min) 5% SAIFI (#) 5% Call Centre Service Index (%) 5% 60% 70% 75% February,

12 THESL 2009 Scorecard KPIs Weight Threshold Target Maximum People Safety - My Goal is Zero (%) 5% 93% 94% 95% Safety Leadership (%) 5% 70% 80% 90% Attendance avg. # days absent (#) 5% Finance Operating Expense ($M) 15% $ $ $ Net Income ($M) 15% $55.1 $60.1 $65.1 Operations Distribution Plant Capital per Unit ($K) 30% $1.05 $0.975 $0.90 SAIDI (Min) 5% SAIFI (#) 5% Feeder (FESI-7) (#) 5% Customer Call Centre Service Index (%) 10% 60% 70% 75% February,

13 Glossary of Terms Base Pay The amount of cash compensation that you receive for performing your job based your individual performance relative to your current pay within the salary range. Maximum - The demonstration of superior performance that exceeds expectations. Target - The expected level of performance. Threshold - The minimally acceptable level of performance necessary to earn an incentive award. Variable Pay The amount of cash compensation you have the opportunity to earn in addition to base pay based on a combination of corporate and/or business unit results and your individual performance rating. A note about performance pay and employment status: Employees must be on the payroll as of December 31 st, 2009 for eligibility. Payouts are based on your salary as of December 31 st, Consideration is given to employees who have retired during the year. For employees who are promoted or transfered during the year, the award is pro-rated. The pro-rated calculation includes the number of months in the new position. The actual payout is weighted accordingly and reflects the target payout for each position. Leaders are accountable for submitting performance contracts for all new hires, employees on probation, or employees joining their department. For employees who retire, become disabled, or die during the year, a pro-rated payout is calculated based on the number of months worked in the position. Payouts are made at the same time as all other management employee payouts. For employees who are on sick leave or maternity leave for the entire year, no payout occurs in respect of that year. For employees who are on extended sick leave or maternity leave for only part of the year, a pro-rated payout is calculated. If an absence is less than three months, some discretion may apply. No payouts will occur for voluntary resignations or terminations with cause during the year. A note about base pay increase: The hire date for employees to be eligible for a base pay increase is before September 30 th, February,